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If Facebook's profits touch $1Billion this year (as is expected), the valuation of $100 billion puts it at a P/E of 100. Thats high, but not too high for a grow
by xcode 15y ago
If Facebook's profits touch $1Billion this year (as is expected), the valuation of $100 billion puts it at a P/E of 100. Thats high, but not too high for a growth company (Amazon has a similar number). In fact, the forward looking P/E (assuming Facebook might make $2 billion next year) is a (relatively) low 50. Google has a P/E of about 15. One of the reasons that the P/E is so low is the belief that Google has grown a lot, and wont grow much more.
To be honest, this is somewhat of a disappointment. The companies that solve 'hard', core-tech problems like Google and Microsoft are falling behind. Sad. Sad.
- hugh3 15y agoSad, or a good buying opportunity? I bought some GOOG the other day because, damn, P/E of 15? I'll take that! GOOG can't expand its userbase much more (since it's already, to first approximation, everyone on the planet), but it can certainly find new ways to give 'em stuff they're willing to pay for.
- 6ren 15y agoThey haven't been good at that, historically. Partly, they are cursed by success: a new business would have to be stunningly lucrative to be more than a rounding error of their current business, it is so incredibly successful. According to the Innovator's Dilemma, they would have to spin out an autonomous unit that could get excited about small wins and shape itself to them. But google doesn't do that - they have all these fun little 'entrepreneurial' projects, but none of them mean anything to google organizationally, because they don't, and virtually can't, impact the bottom line. They're just PR.
- ippisl 15y agoThat also fits well with larry page's thinking. he likes big projects. he likes that even before google, so he probably likes that even more now.
- blantonl 15y agoGoogle reminds me of how a jet plane takes off and reaches cruising altitude. What ground breaking significant product releases has Google brought to market in the past 2 years? That might explain a P/E of 15. Google is being properly judged by the investment community now that the IPO has passed and the "hype" has faded away.
- mdwrigh2 15y agoThe two year time frame is kind of harsh. Things need time to grow. See: Chrome, Android. Both were released 2.5 - 3 years ago, but have only really started hitting their stride in the past year. Give Wallet, Music, Chromebooks, etc. time to grow.
- tapp 15y ago> What ground breaking significant product releases has Google brought to market in the past 2 years? Off the top of my head (although it's not technically a single product release) taking mobile OS market share from low single digits to just shy of 40% in under two years strikes me as a pretty significant accomplishment by any reasonable standard.