Google's Imminent Demise
It should only be a matter of time before Google shares start to lose their lustre, according to National Post columnist Paul Kedrosky. He argues this is an inevitable fate because the search engine sports a sky-high price-earnings multiple; a public float that will expand by several million shares in early-February; a management team with a quirky reluctance to cough up clear guidance; and the distinct prospect of disappointing investors looking for stellar financial results.
Kedrosky's thesis makes a lot of sense because there is no way high-flying Internet stocks such as Google, eBay, Yahoo and Amazon can avoid being penalized for not meeting expectations. Look at what happened to eBay this week. It posted record fourth-quarter sales but fell short on earnings by a penny, while offering modest guidance for 2004. As a result, eBay lost US$13-billion of market capitalization on Thursday.
eBay CEO Meg Whitman may contend the lower guidance reflects investment plans for China and PayPal but investors are thinking next quarter rather than long-term. They don't care if eBay is seeding its Chinese operations for strong growth in the future. It's a sad comment on investor behaviour but this is the harsh reality of a market with a short attention span and high - if not unrealistic - expectations.
