Ticker Shock: Five Reasons Not to Jump On the Google Bandwagon

Not to put a damper on the party, but anyone else out there getting the feeling we're a little overbought here? Heck -- even Roubini is sounding a bit optimistic.

Asian stocks came to life overnight. The Hang Seng and the Nikkei were up 2.42% and 0.55% respectively. European stocks were in positive territory earlier this morning, too. And here in the US, we're currently trading lower.

Here’s what I’m seeing this fine Friday morning:

Google (GOOG):
 Did you get a chance to see its second quarter?

Excluding items, it earned $5.36 a share. That’s much better than the $5.09-a-share estimate I was seeing. But expect some underwear to be in a twist over its revenues, which were up only about 3%. In other words, folks will be talking about the ad environment today.

My thoughts on the quarter and the overall situation:

1. The shares could sell off in early trading today. But all things considered, Schmidt & crew did pretty well in the latest period. It's a solid bottom-line beat, and the top line grew.

2. Google is a company that's clearly come very far over the last several years so it deserves kudos for that. It seems like just yesterday I was mocking the name "Google" and now it’s all but revered.

3. I’m not sure the ad business is going to get too much better in the very-near term. But then again, I’m not expecting it to get terribly worse, either.

4. I'm wary when I see pundits on CNBC and other shows confidently touting that the stock will surpass $500 (or some other price target) by such and such a date. Too many people expect too much from this company, which could set the stage for disappointment.

5. I’ve said it in the past, but I’ll say it again: Percentage wise, Yahoo’s (YHOO) stock could go up more in the next year. Don’t count Bartz and her posse out.

International Business Machines (IBM):
 How could anyone not like Big Blue’s second-quarter-earnings report?

As fellow Minyan Terry Woo points out, it beat on the bottom line and raised its ’09 guidance.
My thoughts:

1. I’m generally a conservative guy and don’t like to chase stocks. But I’d chase this one up to $115. This was such a blowout quarter. Plus, there's that ’09 guidance “of at least $9.70.” I think the stock is going to smoke like my first car (a 1979 Blazer that leaked half a quarter of oil a day and lacked the parking gear).

2. You think we might see some estimates getting ratcheted up over the next few days? I can picture analysts' Excel spreadsheets opening up right now.

3. Remember that once the immediate excitement surrounding these numbers dies down (probably over the next few days), some air could escape from the balloon.