Bring Back the Google Parade

By Dr. Duru written for One-Twenty

April 21, 2006

I have been doggedly negative on Google's stock for about 50 to 70 points (14% to 20%). I think it is about time to get carried away with the latest rally in the stock. Thursday night Google reported earnings that apparently pleased a lot of folks. I will not go into the results since there is plenty of media coverage on that tip. I just wanted to take this opportunity to say that even after another 30 points (8%) tacked on after-hours, my Google cheer has returned. Call me late if you like, but it is better to be late than not to come to the party at all, especially when goodies are being tossed like so much bright confetti.

I listened to much of the conference call, but I found nothing that got me overly excited (I nodded off at times!). Regardless, the news has turned positive and bullish on Google again, and it seems we are getting back to the Google we used to know. I was intrigued to hear Google emphasize once again that they expect some margin pressure as they continue to invest in the business. It is clear that Google retains the full faith of the market that these investments will pay off big at some point in the not-to-distant future. I feel my old target of $400 will finally get left in the dust for now. I have no idea where we go from here ("Kramer" threw a dart at $600 - and not long ago he was so lukewarm on GOOG that he called it a stock that could go up no more than 30 points as easily as it could go down 30 points), but I am willing to ride it for whatever it is worth (click here for disclaimer).

Before I sign off, one more confessional. Back in October, I sized up Google against the "old economy" in the form of Catepillar (CAT). Since then, CAT has gone up almost non-stop with little drama and almost no fanfare for about a 50% gain. All across the stock market, cyclical, old-school industrial companies have seen their stocks soar as the market maintains an abiding faith in the on-going strength of the economy. Over that same span, Google has "only" gone up 20%...and the ride has not been straight up. Instead, GOOG made that 20% the hard way with lots of stomach-churning drops and bad news. I suspect that with positive news flow blowing at Google's back again, Google will resume its march ahead of the old economy. It will be an interesting race to watch...especially if the Fed keeps on raising rates. GOOG could be the "last" growth stock standing if the Fed keeps moving to clear out the drunks from the fellowship hall. Stay tuned!

Be careful out there!

DrDuru, 2006