Googlestockmania Brought to You by Henry Blodget!
Please see this disclosure related to me and Google.
Good god, Google at $2,000 a share?
Oh, it’s just that Web sprite Henry Blodget (pictured here), at it again, over at his blog on his site Silicon Alley Insider.
The former Wall Street analyst enjoyed brief fame in the last Internet mania for predicting that Amazon stock would go to $400 a share (and it did–but not for long!). Then later, he got investigated for touting stocks publicly that he disdained privately and, thus, was barred from the securities industry for life.
Yesterday, the can’t-help-himself Blodget wrote a much-noticed post arguing that the search giant’s stock could go nuclear.
Remember a couple years back when some analyst floated the idea that Google could eventually be worth $2,000 a share–and was ridiculed from coast to coast? Well, first it’s worth noting that Google is now almost a third of the way there. Second, it’s worth noting that $2,000 a share would mean a market cap of about $750 billion, which–given a reasonable time horizon–just isn’t that far-fetched.”
Um, Henry, it is far-fetched, as to be borderline fanciful. So, please stop taking all those cold medicines that make you all fuzzy-headed, because your theory even makes Facebook at $15 billion seem reasonable.
Given my obvious link to Google (see my disclosure here again, if you did not click at the top), it might surprise you that I think the current price for Google–zeroing in on $600 a share–is moderately insane.
But it’s fueled by the fact that there is not a whole lot out there to invest in if you want to be in the Internet market. Yahoo? Maybe after that 100 days is up. eBay? Skyped! Microsoft? Zzzz. Amazon? Still, in the end, a retailer.
Thus, search behemoth Google, which keeps gobbling up share right in the middle of the boom in the search-ad business, wins the beauty pageant and the faux diamond tiara.
For now. While Google is a real star in its core business (and what a business it is–it’s like having the water franchise in the Mojave desert), there are a lot of obvious issues the company will be facing as it moves forward.
Not today maybe, but three or four years hence–and the seeds of trouble are already planted.
You could go on about the lack of stunning success in its diversification efforts–admirable as some of them are. You could wonder, whither YouTube? You could worry about that DoubleClick deal getting slowed down or even stopped by the government.
You could focus on too-high development and employee costs. A downturn in the economy and the ad market is a recessionary nightmare all around and especially for Google. And did we mention the potential power of social networking?
Or that Google founders Larry Page and Sergey Brin might soon have to return to the alien planet from whence they came, taking with them those big-brained, bike-riding, solar-power-generating Googlers and leaving all us small-brains to flail around once again on the Web?
But while we can all have a good long giggle at Henry’s cheek, I think I have to side solidly with TechCrunch’s Michael Arrington on this issue (and, those who follow stupid tech blogging insider stuff, you know it’s not my first or even second impulse).
Except for the too-aggressive suggestion that someone “muzzle” Blodget, Arrington (pictured here in a disturbingly Blodgety pose) wrote a passionate and most excellent post on Blodget’s latest prediction.
He is entirely right that even if Blodget was not being serious, such outlandish statements are not helpful.
Writes Arrington persuasively:
Henry Blodget made his name by predicting outlandish price increases for Internet stocks in the late nineties. A lot of people lost a lot of money (or, all their money) by listening to his recommendations. The government charged him with securities fraud in 2003 and he was subsequently banned from the securities industry for life.
“But Blodget is a bit of a one-trick pony, and he likes to stay in the headlines. So he continues to build cases for big valuations of Internet companies. The only difference is he publishes these thoughts on his blogs. And people still listen to what he has to say.
“He isn’t always bullish (he’s recently trashed Yahoo and eBay). But he can’t seem to contain his regular predictive outbursts that such-and-such stock is worth massively more than it is now.
“When he’s talking about Facebook being worth $6 billion to $20 billion that’s OK, because it isn’t a public stock and no one is going to go out and throw away their life savings. But when he builds a case for Google’s stock to go to $2,000/share, he’s crossing a line.”
I agree wholeheartedly.
And, admirably, Arrington also points out criticism he himself gets for being “overly optimistic about young start-ups.”
He is, but he’s right that it does not matter nearly as much–who really cares that much if another venture capitalist doesn’t get his gold-plated wings–as much as those companies in the public market where regular people can lose hard-earned money trusting faulty advice.
I was always offended back in the last dot-com frenzy, when Wall Street analysts were giddily recommending stocks in companies they knew full well were not up to snuff and then walking away with bags of money from mutant initial public offerings they engineered.
The press, including myself at times, were bad enough by not being as tough as we should have been, but the double-dealing and “friends-of” stock roundelays were indeed sickening to watch.
At one point, in a story I tell a lot, when an investment banker said to me that he was about to take a company that was “pre-revenue” public, I asked if perhaps it wasn’t easier just to go mug some old lady on the street and grab the money in her purse to speed things along.
This should not happen again. This new round of Internet innovation–and, yes, bubble–has much more significant and useful and terrific companies in it and many deserve to grow in a healthy environment.
And there’s already enough hype without writers like Blodget piling on, especially since he is (and always was) such an excellent and convincing writer.
It wasn’t always thus for Blodget in regards to Google, by the way. He was a bear on it as recently as January 2006, as reported by Digital Daily’s John Paczkowski, back when he was writing for “Good Morning Silicon Valley.”
So let’s return to that little oasis of sanity and not wallow in mania and heedless speculation.
In the name of safety of old ladies everywhere (and I am veering in on that demographic all too soon), we all can do better than that.