Divide By Ten

Google at $400:Is It on Merit Or Just a Mania?

Thus asks the Wall Street Journal this morning, in a rather silly article devoted to a rather silly topic: the meaning, if there is one, of the fact that Google shares hit $400 yesterday.

Don’t get me wrong: I like Google as a business model and a company. And I’m not indifferent to the share price (although I make no recommendations here regarding stocks and never will).

But uncommented on in this morning’s “Merit or Mania?” article is the fact that shares of Yahoo had a much bigger move yesterday than Google—and also reached the same milestone. Yet nobody seemed to notice.

All you have to do is divide Google’s stock price by ten. Do that, and shares of Google merely rose 53 cents yesterday to close at $40.35. Yahoo shares, meanwhile, rose over $2.00 and closed at $42.23. You can also multiply Yahoo by ten to make it comparable to Google: looked at this way, Yahoo shares rose more than $20 yesterday and closed at $422.

Which makes Google’s $5.35 pop to $403 a bit less eye-catching, and in and of itself no big megillah, at least compared to a peer company.

But the fact that Google’s market valuation is larger than Coke, as the article pointed out, is worth looking into.

Jeff Matthews I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.