Once Again, Ahead of the Curve
Base10 wrote this back on January 3rd:

[A] stock analyst from Piper Jafray predicts that Google's share price will top out at $600 a share. Ha! Google closed at $435 today, high enough certainly but who are we kidding here? Google has earnings of about $4.50 per share. Using a long-term discout rate of 5.7% (30 year treasuries) and assuming a long term economic growth rate for the US economy of 2% (not necessarily realistic), the discounted present value of the stream of income from Google's earnings at most could be values at 4.5/(5.7-2) which is about $108. This is the maximum amount Google should be valued at. The problem seems to be that when growth rates approach the discount rate, the projection of future value apporaches infinity. Don't get fooled! The tech bubble has not returned.

Now Reuters says this:

Shares of Web search leader Google Inc. -- off 24 percent from highs set last month -- could face a further 50 percent decline, Barron's said in the financial weekly's February 13 edition.

Barron's scenario for a fall in Google's stock is based on speculating about what may happen if mounting competition or fraud by users of its Google's ad-buying system led to a 20 percent shortfall in bullish analysts' 2006 revenue estimates.

The weekly uses a back-of-the-envelope calculation to show how a 20 percent revenue miss could cascade into a 30 percent profit shortfall. Such a drop could then lead to a decline in the price-to-earnings multiple of the stock to 30 times earnings from the present P/E ratio of 41, it said.

"That would make the stock worth $188, versus its recent $360," Barron's reported. The stock traded at levels above $471 on January 11, but closed at $362.61 on Friday on Nasdaq.

- posted by Base10 @ 1:32 PM