This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Google Bubble

A month of rumors and the final product announcements have put Google stock on an Apple-like rise. At $916, it sells for 27 times earnings, even though revenue growth has slowed, operating cash flow cratered in the first quarter, and it holds barely $1 billion more in cash than it did a year ago.

Full disclosure. I like Google. I always have. I have pounded the table for the stock in the past, and still hold a few shares.

But the recent price action strikes me as the product of a true reality-distortion field, with Larry Page's silence (he has a form of vocal cord paralysis, he writes) only adding to the corporate mystery.

What investors believe is that with the costs of the network set as essentially free, any revenue Google gets from these new services goes straight to the bottom line.

That's not true. Content makes Google a reseller; financial services require development of their own specialized infrastructure, and Google is still getting pushed around in national capitals and courts around the world over patents, taxes, and antitrust issues.

At Google I/O, Google wrapped all these business initiatives around free features like voice commands on Google Now, and a "card" system for mobile devices displaying a full screen of data at a time, which will also become a new design metaphor for the Google Plus social service.

What's cool about all of this is that these weren't just product announcements or demonstrations. These are changes in the underlying software of Google that are available now - they're all real. All the links in this story go right to Google. This is the heart of the matter, that networks can change at the center and deliver new features to everyone, all at once, while device owners have to upgrade one-by-one.

But these products are unproven. We don't know how consumers will react to the changes. If they make Android more competitive with Apple's iOS, if they really drive revenue, then the bulls will have been proven right.

But I wouldn't assume that without more evidence.

At the time of publication, the author was long GOOG and AAPL.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $113.29 0.00%
AMZN $518.01 0.00%
FB $91.01 0.00%
GOOG $630.38 0.00%
MSFT $43.93 0.00%

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs