Henry Blodget is back, and he has a pretty good blog. Blodget was the CIBC/Merrill Lynch analyst who put the $400 price target on Amazon (AMZN) back during the .com boom. Turns out he’s a pretty good writer. He makes a good bear case for Google (GOOG):
Google’s major weakness is that it is almost entirely dependent on one, high-margin revenue stream. The company has dozens of cool products, but with the exception of AdWords, none of them generate meaningful revenue. From an intermediate-term financial perspective, therefore, they are irrelevant.
Blodget was considered the top analyst for the Internet sector back in his day. Like him or hate him, his writing is worth checking out if for no other reason than to get a different view.
Disclosure: I’m holding GOOG put options, which means I think GOOG’s stock price will decline. Do NOT construe any of the above as investment advice.
4 thoughts on “Henry Blodget is Back”
He may be right, that google is not that good. But a good analyst should be able to tell us whether a stock is overvalued or not. An undervalued stock of a bad company is still worth buying. As a matter of fact, when everyone knows that a company is bad, it is very likely to have been undervalued, and it is time to buy it.
Based on his disclosed holdings, I don’t think Blodget is a good trader. However, he puts up a good defense of analysts and price targets for companies like Google here.
Also, I think Google’s stock is more or less trading on sentiment now as opposed to any hard valuation metric except “too much” or “too little”. Valuation models probably won’t make you much money in a scenario like that. Skill on the show Family Feud – ie good at guessing what the consensus opinion is – would probably serve you better in trading GOOG stock than the most complex valuation model.
Blodget is a forthright and engaging writer and personally he’s been through a wringer. I like reading his columns even when I think he may be wrong. In pre-Internet days he might have sunk without a trace after his fall. But now he gets a second act, on his own terms, and he is wiser than he used to be. Maybe he can’t trade but so what. Lots of good traders can’t write.
I think of Google as a binary option. In the long run it’s either going to be worth an enormous amount, or it’s going to face some combination of competition and anti-trust assaults that turns it into just another company. I was very bullish until recently; now I’m unsure.
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