By Chad Brand
NEW YORK (TheStreet) - It was hard for CNBC to stop talking about Google's (GOOG) inadvertent and premature earnings release on Thursday, but the logistical topics of the leak should largely be ignored by longer-term investors. The reasonable question is whether the stock is attractive after a one-day, 60-point decline. While it may seem like an opportunity, one needs to keep in mind two things.
First - where the stock has traded in recent months. The shares remain $150 above their 52-week low thanks to an enormous rally lately. And even more importantly, the stock's valuation, while not excessive by any means, hardly screams cheap in my view.
Let's understand that the leaked earnings release is not the real story here, even though that is what got the most airtime on CNBC and throughout the financial media. The stock would have declined the same amount regardless of when the earnings figures were released. In this case, the numbers are what matter. As a result, I would downplay the significance of the leak in terms of how it might dampen individuals' enthusiasm for the stock market. This is a non-issue for me, and I do not think investors in Google really care that the numbers were leaked. If you liked Google's outlook before the report, you have reason to question the weakness in their business last quarter, but you would still be facing the same decision, even without the leak. I do not think there is any reason to think you somehow were hurt by the mistake. The bottom line is that Google shares are now trading in the 600's, not the mid 700's, thanks to lower-than-expected click prices and higher-than-expected losses in the newly-acquired Motorola business. These are the issues we should be talking about.To me, Google shares are not cheap enough to buy, even after a fairly large decline. At around $700 per share, they trade at a premium to the S&P 500, at about 17.5 times 2012 earnings, which should come in around $40 per share. Factoring in the company's sizeable cash hoard (around $40 billion or so) we are looking at a cash flow multiple of 12.5x, which is on the high side of what large cap, blue chip companies typically fetch. While the stock isn't expensive, I do not find it terribly attractive as a value name in the technology space.
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