Would you buy Google shares? What about Apple and Amazon?

Tue, 29 Apr 2008 00:53:57 GMT

Everything about Google looks so promising, bar the following Google sued over 'unwanted ads', or more specifically the fact that their revenue relies solely on online Advertising which is unreliable and potentially a bottomless pit hole. Perhaps I am overly concerned since Google's revenue has been steadily increasing despite these lawsuits. But instinctively I see no substance in Google's online advertisements. I've asked many around me and none of them pay any attention to Google's text based ads, their acquisition of DoubleClick is probably a good sign that they've realised this. Personally I am much more inclined to click on ads with pictures or Flash similar to TV ads and even then I might click on at most 3 ads every year (yes I can count the number of times I've clicked).

What's most promising about Google for me is their push into software as a service (Saas). I can see Google becoming a leading enterprise software maker in the not too distant future. In fact I would argue that they already are, Gmail is the proof. But there are also Google doc, Google site (wiki), Google reader, Google calendar and let's not forget their newly launched App Engine service. We are boot-strapping our startup operation using all of these Google technologies and we see absolutely no reason to use anyone else. In a sense we are at the bleeding edge of using all these technologies and we see many others following swiftly in the same direction. This is really the root of my optimism about Google.

Google may face competitions from Microsoft in all of these areas, but I just can't see Microsoft transitioning from their existing business model to the new cheap, on-demand, commodity based, enterprise, web solutions model. It's the culture of these companies that ultimately dictate what they become and I think Google's culture is much more well-suited to the new economy built around the web.

Having said all of these, is $552.12 USD at a P/E of 38.81 a good buy given the current state of the US economy? Or would you buy Apple at a similar P/E, an equally promising company with arguably less risk and more prospects for growth? Or Amazon with a P/E of almost 70, again very promising with the release of Amazon Kindle and Amazon web services. I think in the long term all these companies will be good buys, for me it's just a matter of what price to buy into them. If you've any valuation model to share with me, I would love to see it.

JZ

James Zhuo 卓宇翔: Invest

Would you buy Google shares? What about Apple and Amazon?