Google poised to become world's first TREEELLION DOLLAR company? Now that 2014 is up and running, you might be looking over your stock portfolio and reevaluating your investment options. If so, one analyst has a bit of advice: go long on Google, which he believes may become the world's first trillion-dollar company. That's trillion. With a "T". As pointed out in a "welcome to the new year …
In many non-English languages, the use of the short scale (often called US) Billion and Trillion is not used.
Here in Germany, Bill Gates is a Miliardaire (he has several miliard dollars to his name) and big businesses like Apple and Google miliard businesses.
A billion is still a billion, which gets confusing when converting all day long between English and German for reports.
at the marketwatch links shows that Google's P/E ratio is 31 whereas the other three are all sitting rather more comfortably at around 13. So Google's value is already *2 inflated relative to the others by expectations of future growth. I don't hold out much hope of future Microsoft growth so I would bet that Apple or Exxon Mobil would be the first to make it ... not that I am investing any of my money either.
Google is still making most of its revenues from advertising. At some point, they will start selling products to end users. Even if Google only sells ad free versions of existing products (search, for example), it only need to convert a very small percentage of its rather large user base. Big as it is, Google still has a great deal of potential to line its shareholders' pockets.
Apple and Exxon are giving back dividends, while Google is not. It would be fairly logical if Google kept growing faster than them.
The thing is, Exxon and Apple put limits on investing in new markets, while Google does not. I personally find it a bit disappointing from Apple. They do nice products, but they are unwilling to double down in less successful products. Look at iCloud, and their maps: They are not interested in making them available to everybody. The maps are offered to people who have an iPhone or a Mac. That's it. Not even a web site!! They are a hardware company, and all their services only exist to support that. They could probably grow a lot their software and services, but instead? They give back a dividend. This is openly admitting that they don't know what to do with the money. That they don't plan on growing.
Can you imagine Google doing that? Google will invest in all kind of crazy projects trying to find something interesting. And that, I believe, is why Google will be a trillion dollars company before Apple.
Big companies seem to atrophy and then get lost, MS seems to have that and Apple appears to be paralysed post-Steve and heading the same way. Google, for now, has some hope but their reliance on advert-support is worrying.
Apple, of all, should really be doing something new and imaginative. Hell, they have multiple billions in the bank and had some good[1] leadership until very recently, why can't they throw out a few dozen small $10M-ish projects on the off-chance if any come to fruition?
[1] Yes, there are debates about St Jobs's talent and approach, but he could at least see products from an end-user's point of view, and how nice they would be to use, and kicked arses until things were made to work OK. That should be the norm, but appears to be a super-power in today's business environment.
Google announce they bought Schaft before it won any awards. An we don't know when Shaft was bought, the company only been around for 2 years and Google been buying up robotic companies for the past year in secret, for all we know Schaft spent half of their life under the ownership of Google.
"Google will invest in all kind of crazy projects trying to find something interesting"
That's what they were doing in the last decade, and earned the Chocolate Factory moniker for that. But around 2008 something changed. They started to kill off those crazytech projects and transform into a bigcorp . It's hard to be sure what's going on there - but it may well be that they have jumped the shark. Or have become one.
Well they have a sizeable proportion of the world's online advertising, so let's say they can't grow much there (unlikely). But what about other advertising... imagine if they jumped, instead of from advert-tech to other tech, but from advert-tech to other forms of advertising? That's a massive market right there.
I remember seeing it for Microsoft in late 1999, and Apple in the summer of 2012. If we hear a few more nutters with the same prediction it'll be time to short Google!
Given the already inflated P/E, and the requirement to grow either the P/E, EPS or both by over 2.5x to accomplish this, anyone who thinks this will happen is crazy. Well, unless they're talking 20 years from now. Inflation alone will probably double everyone's P/E, and if the positions stayed the same Apple would hit first since even at their lower prices they're still halfway there - Google has to go up 50% just to match Apple!
Is that no one is going to believe such a large company has growth prospects, so even a P/E of 10 would be difficult to maintain. Thus you have to earn over $100 billion profit, after taxes, and have the prospect of continuing to do so for at least a 5-10 year horizon.
Google is already at a P/E of 31, so not only do they have to grow 3x bigger in market cap, their P/E has to flatten by 3x as well. Where is Google going to earn 10x more than they do today? There are far fewer potential fewer customers than customers they have now, so it isn't via organic growth. They can't show us all 10x more ads than they do - more than that actually since the ad rates keep dropping over time as advertisers see that Internet advertising is saturated already.
Some will argue "they'll move into new businesses" but everything Google does, every business they're in, comes back to pushing more ads in our faces. They give Android for free, because they can get their services - and the ads that go with them - on a billion phones. It is highly unlikely that of all the car companies and various research going on that Google's self driving car technology will be what ends up in everyone's car. But if it does I have a feeling they'll use the Android model and give it away free, and find a way to force ads into the car where the "driver" suddenly has a lot of free time to surf the web and buy stuff. That method of making money is just as much in their DNA as making money off selling hardware at premium prices is in Apple's DNA.
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