Posts for Tag: stock price

I'm not saying LinkedIn is overvalued ... but I'm saying LinkedIn is overvalued

I was just looking at LinkedIn's stock price today and something stood out. Not the $81+ current stock price but the P/E ratio of 1,217.61. That's correct 1,217.61. For some perspective, Yahoo! (which is struggling) has a P/E ratio of 19.45. Google, which is still on a roll but not the darling it once was has a P/E ratio of 20.54. You can argue that a hot company liked LinkedIn versus Yahoo! is not contest. However, versus Google? Not so much.

For the record, I'm not a stock guy. There are probably some nuances to the P/E ratio that don't tell the full story, etc. Also, I really like LinkedIn as a service. It's invaluable to me as a networking, recruiting, prospecting tool. But to give you some perspective, I've spent tens of thousands of dollars a month advertising on both Yahoo! and Google, each. Again, that's PER MONTH. Since LinkedIn has been in existence, I think I've spent a total of less than $500. Again, I may be atypical and maybe I'm an old fart and not with it like the cool kids who grew up on social media but it's hard for me to understand that valuation. I sincerely hope they grow into it and continue being successful.

Woulda... Shoulda... Coulda... In a parallel world, I'd be richer

Let's rewind to 1996..... My first job out of college was at a database marketing consulting division of American Express called Epsilon. There I was introduced to the lovely world of Excel grunt work and Mainframe TSO queries. However, one of the highlights of the job was that the first account I was put on was Apple Computer. Epsilon basically compiled the direct marketing lists that Apple sent promotional mailers to. Though my exposure to Cupertino was quite limited (Epsilon's offices were near the Transamerica Building in San Francisco), I did get to meet a lot of the folks in the marketing department at Apple. The atmosphere there was somewhat muted. Gil Amelio was in power at Apple and seemed to be running the company like any other computer maker - trying to sell as many cookie cutter machines as possible while cutting costs. The only difference was nobody wanted Macs and Gil wasn't really interested in doing much besides running a lean operation. As you can probably guess, that's the formula of someone looking to streamline a business either for sale or the slow inevitable march to oblivion.

One day towards the end of my first year there (as things were getting progressively worse for Apple), news came of an unexpected bold move - the purchase of NeXT Computer and their NeXT OS which is the basis for today's Mac OS X. However, the more important asset in the purchase was the return of Steve Jobs though at the time, his role was as of yet undefined. At this time, Apple's stock was hovering around $4 (split adjusted) and languished for years. No one thought much of the purchase, in fact, a lot of folks panned Amelio for over paying for NeXT. Why would you, a company with an OS the vast majority of the world doesn't use, buy a company with an OS even fewer people used? Didn't really make sense until July of 1997 when Amelio was ousted and Jobs took over. I remember on the date of the announcement, I popped my head into the Epsilon Account Director for Apple and said, "Have you heard the news?" She replied, "Yup, I'm on the phone with my stock broker now." Apple stock price was about $3.80. I bought about $5,000 worth - almost my entire portfolio was now Apple stock.

Fast forward to today, Apple just announced its most profitable quarter ever. Buoyed by iPhone sales and the impending launch of its tablet computer, Apple's future can't be any brighter. That $5,000 worth of stock would be worth about $250K today. The operative word here is "would be" since I sold it once the stock doubled a year or so later. I guess you can't really cry much over a stock transaction that netted you a positive gain but still, no one thought Apple would hit these heights 13 years ago. If you had asked me in 1997 to bet on whether Apple would still be in business 13 years later, I would have given it a 50/50 chance. Gotta give them all the props in the world. A testament to one man's blinding adherence to doing insanely great things.

Google, the one trick pony?

Om Malik writes in a post that Google is great at search but bad at investments (in reference to today's earnings release within which was mentioned a $1+ billion write down for bad investments). I wholeheartedly agree with this sentiment and might even take it one step further. In regards to making money, does Google really do well in any field other than search? For the record, I use a lot of Google services like Search, GMail, Google Maps, and YouTube to name the big ones. I think these are all awesome services but they don't come near to making the huge profits that are synonymous with the Google cash machine (do any of these products even generate some profits?). It's not a knock on Google by any means. They have afforded themselves the right to roll out any product they want regardless of its profit generating capabilities. It just makes me wonder whether they'll be in the same boat as Microsoft someday - a company that never really figured out a way to generate huge profits from anything but desktop software. But hey, if I generated the profits that Google does from search and Microsoft does from desktop software, who really cares?

UPDATE:  To further prove that no one cares, Google is trading almost 8% higher as of 11am the next day.

Steve's time off

Apple's stock took a pounding after news was released that Steve Jobs would take about six months off to recover from his "hormone imbalance".

The New York Times is reporting that people familiar with Jobs' current medical treatment say it's not a recurrence of his pancreatic cancer but something that is not allowing him to absorb nutrients from his food. That's definitely a good sign and I'm glad he's taking time off to rest. It was said that stress wasn't helping in his recovery so now he can take all the time he needs without the prying eyes of the media.
Though Jobs is largely responsible for the turnaround of Apple almost a decade ago, I think Apple's in a current position to be fine without Jobs at the helm. As long as everyone else holds on to the ideals of making the highest quality products with no compromises that he espoused, Apple will continue to turn out winners. It was the years when Apple was led by folks more interested in profits than products that Apple was lost. With guys like Jonathan Ive and Bob Mansfield around, I think we can expect to see great products from Apple, even without Jobs steering the ship ... though it never hurts to have him in your corner.

Wall Street up for all ... but not equally

For full disclosure, I sold every last stock that I owned right after the first dot-com bust in 2000/2001 so I never get overly excited or bummed when the market does well or not. I still track the usual suspects in my industry though and noticed an interesting trend. Below is today's results for Google, Yahoo, and Microsoft.

Not a bad day all around. But does it seem bad that Yahoo isn't rebounding as much as the others. Shouldn't a rising tide raise all ships? A more alarming stat is that since October 1st, Yahoo has fallen almost 38% while Google and Microsoft have fallen a little over 24% and 23%, respectively. I hope the folks over at Yahoo can pull through this. I think with 3 major companies in the online space, there will be more competition and innovation. I've always tried to stay loyal to Yahoo but gave up using their search engine a couple of years ago. Still have my My Yahoo page and like their Sports section and I'm sure their other properties are doing well. Still, they need to shore up their search technology and NOT do the Google deal as that is a slippery slope down to technology mediocrity no matter what they say. Given the choice every quarter of whether to invest in technology or squeeze out a few more pennies per share in earnings by using Google technology, I'd say most folks would take the easier path. Let's hope I'm wrong.