Cramer and Google

Did you watch Cramer's Mad Money today? He did a recap for the year and showed (mostly) his good calls and a few bad ones. And he just went crazy over GOOG. Man! the guy had screamed for Google right from February (Buy Buy Buy). And he couldn't have shouted more. I am absolutely with him on that one. That was his best call of 2005 and he fully deserves credit.
Bytheway, I had got in Google when it was below $200. And that was NOT on Cramer's recommendation. I didn't even know Mad Money at the time. Okay enough of my boasting. Why did I buy Google that time? One simple but strong reason - I beleived in the company! I have to admit that I had no freaking idea they would do so well - within a year. The max I was expecting out of them was a 50% return. Well they gave me a 100% - thank you guys. I should also acknowledge here that Anthony Noto's (analyst at Goldman Sachs who covers Google) bullish calls about Google were also another driving factor for me to get in the stock.

So what do you do from here? What if you have been just waiting and waiting as it has zoomed almost 5 times from it's IPO? I feel that this company is like a one in lifetime opportunity. And it has yet to run it's full course. There will definitely be ups and downs, where you may feel you are going through a wild ride. Your success (or failure) will depend on how hard you can cling to it. I wouldn't be surprised to see the stock cross the $1000 mark in the next 5 years. Please - don't take it as my price target. It is just my guess.

We can do some calculation here. Average 06 Estimate is $8.6. The friday's closing price of 430 yields us a forward P/E of 50. So taking the same 50 multiple in order for the price to go to 1000, Google will have to earn $20 - about 2.3 times it's estimated earnings in 2006. To put this in growth perspective, Google will have to grow about 50% for the next 3 years and still have a good momentum at that time (for people to pay a 50 multiple at that time) for it to break 1000. Would it be able to do that - hey it is quite possible looking at their explosive growth for the past couple of years! So now you decide.

Should you buy it today? Hmmm that is a completely different question. If you are patient and can take wild rides then surely you can. Otherwise if you are patient in another sense just wait a bit. We will be entering a tech sluggish period soon (February end to July) and you can get some opportunity to get in. Choice is yours. Happy Googling!

Just another note: In the show Cramer mentioned that he flip-flopped on some of the stocks (was a bear earlier and then become a bull - WMT for example) and he said you need to be FLEXIBLE in this game. Read my previous post where I have mentioned exactly that - just a coincidence!