Google Needs To Split Its Stock

By Douglas A. McIntyre December 29, 2006 Updated April 3, 2020

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Is Google a good or bad investment after it closed at $462.56?

Motley Fool said on December 27, 2006 that it may be the worst stock for 2007.

Calling anything bearish on Google can create a near riot in the investment community. You can take a look at the November search rankings from Nielsen/NetRatings in this link and see if you think the glory growth has already happened or if any leveling off was merely a blip.

My partner recently ran something asking if Google’s growth has run out of runway.

Everyone knows that Jim Cramer loves it, although he even said it’s asleep until after the new year.

Most of the analysts that follow the stock are positive and an average price target is close to $550, depending on which analysts you count in a consensus.

One thing is for sure right now in my opinion: If GOOG announced a stock split and went to a normal share pricing with say a 5-1 stock split or even a 10 for 1 stock split, this would be a different discussion. There is merely too much focus on a HIGH STOCK PRICE. I don’t have any dogs in the fight either way, but much of the real discussion and criticism out there seems to be based on this $500 mark. Most of the smaller investors out there think the stock is too expensive to buy.

So, get the Google management to use 2007 as "The Year Google Split Its Stock." This won’t change the company fundamentally at all, but it might actually help even sophisticated investors look at the company easier. With GOOG shares down $5.47 at $462.56 on Thursday’s close the stock has a market cap of more than $141 Billion. Its trailing P/E is 58.7, and with the street looking for roughly $13.75 in 2007 earnings it has a forward P/E of 33.6. For the sort of earnings and revenue growth the company has posted it just doesn’t look or feel expensive. But Internet stock investors don’t want value. They want growth, and they don’t really want to pay $462.00…nor $362.00…nor $562.00…

Dear Google Management: Split your stock so the investment community won’t be so hung up on the share price. Most people get it, but there are too many who are just hung up on the stock price. Period.

Feel free to make a prediction and send it in: Will GOOG the stock be at $600 or $300 at the end of 2007?

Jon C. Ogg
December 29, 2006