Google at $403. Is it worth it?

Steve Rosenbush

Just 15 months ago, plenty of investors were skeptical that the Google IPO was a good bet. In the spring of 2004, investors, analysts and pundits hotly debated whether it made sense to buy shares of the Internet company, then known mostly for its search engine and its spare, elegant home page.

On November 17, Google shares closed above $400 for the first time. They closed at $403.35 to be exact. It’s a stunning climb for a company that was priced at $85 ahead of its IPO on August 19, 2004. The company’s current market cap of $112.6 billion is nearly five times its initial value of $23.1 billion. Time Warner, by way of comparison, has a market cap of $83 billion. General Motors has a market cap of just $12.8 billion.

Its performance on the stock market is a record for Internet IPOs of its size. “We’re in uncharted territory here,” says Scott Cleland, CEO of tech researcher The Precursor Group.

Is the soaring valuation justified, or are we reliving a bad trip from the Internet boom of the late ‘90s? It seems that Google’s valuation is tough to justify, although that doesn’t mean that the price won’t climb higher. However, there are big differences between Google’s success and the chimerical Internet fortunes of the late ‘90s. “Google’s dominance is real. Google’s business is real. We’re very respectful of that. But there’s no legitimate altimeter for these nosebleed valuations,” Cleland says.

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