Today, it sits at a $245 billion market cap and doubled it’s bottom line since 2007. It is not front page news.
What will it take to get there:
1. A few breaks of course (maybe Apple screws up), but more likely they out innovate on software and even hardware.
2. The government will have to stay out of it’s way. The monetary policy is no doubt a help for it’s P/E to stay high for the forseeable future.
2. Acquisitions. Google is bold on this front. Maybe it’s content. Maybe it’s cars. Maybe it’s just connection. I still think they buy Twitter and make the broadcasting and publishing part of Twitter better than ever.
3. Awesome retail experience. I have harped on this for a while, but that goofball at JC Penny building glass cases for polyester clothes should be looking for a job about now. People go in to Apple stores to interact with hardware and buy Apple products and accessories. They should walk next door to do everything else including hangouts, short movies, learn how to use search for their businesses, book travel, and interact with the future toys.
4. Google Play – with 25 billion downloads and a service nobody has heard of, I think they are on to something.
5. Hangouts and YouTube. This is the social network that will matter most when it comes to cash flow.
One Wall Street Analyst who I know (Michael Graham at Canaccord) just came out with an $850 price target on Google. He’s been mostly right on the direction of Google since I met him. If he really wanted the article to get read he would have given it a headline like mine.
His key thoughts:
We believe Google stock can continue its recent momentum on the basis of 1) better CPC trends creating an upward bias to revenue estimates in future periods, 2) continued dissipation of MMI-related apprehension and 3) multiple expansion. We slightly tweak our EPS-neutral MMI estimates and raise our price target to $850.
We believe overall CPC trends are likely to continue to show signs of stabilization or expansion. Our CPC tracker indicates that overall CPCs expanded slightly sequentially in both July and August, driven by higher desktop CPC, moderating shift to mobile, and flat mobile CPCs.
MMI is becoming more of a non-issue as investors are gaining comfort that it is likely EPS-neutral at worst, and potentially accretive after sizeable recent expense reductions. We tweak our MMI estimates accordingly.
We believe the most significant remaining near-term negative is Apple’s continued attempts to come between iOS users and Google’s search engine. This impacts long-term potential but not near-term estimates, and we argue that GOOG gets little credit for its mobile opportunity anyway.
Any wonder why nobody reads Wall Street research? It sounds super smart and often right, but the market does not work that way these days.
Disclosure – Long $GOOG, did sell some on the stream just under $750 a few days back.