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Are Google Shares Cheap at $300?

Stocks in this article: GOOG

InfoSpace, which develops metasearch products, last week offered a revenue forecast below Wall Street estimates, while IAC, which owns, also issued cautious views for the fourth quarter, noting weakness in its search business in the last two months.

But as investors proceed to focus less on the credit crisis and more on the impact of a consumer slowdown, some analysts see Google's current valuation as increasingly attractive.

Martin Pyykkonen, an analyst for Wunderlich Securities, says that although Google cannot escape the challenges plaguing the industry as a whole, he still sees the stock as a worthy buy, noting that its forward 12-month price-to-earnings ratio is just under 14. Compare that to its rival, Yahoo! (YHOO), which has a forward P/E ratio of 24.

"Competitively, nothing's changed -- things have gotten better for them," Pyykkonen says. "They've been dominating Yahoo! for awhile."

And even in tough times Google has continued to throw off cash, generating $1.7 billion of free cash flow in the third quarter. The stock trades at about 12 times cash flow, which looks cheap considering the company's recent dropoff.

Pyykkonen has a buy rating on Google, with a price target of $525.

Indeed, while analysts agree that it's no time to be looking for any sort of a near-term surge in growth for Google, the stock looks like a good investment for anyone looking to stick with it through the long term.

"The near term is not crystal clear but if you like growth stocks ... this still qualifies," Pyykkonen says.

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