Google’s share price should hit $750, Cramer said Wednesday on Mad Money, maybe even higher.
So there’s still time for investors to cash in on “the Google,” as far as Cramer is concerned. This is a great company with spectacular growth, yet it’s still undervalued by the market.
Actually, the Google party might just be getting started, Cramer said. The Google phone should be “gigantic.” YouTube hasn’t even been monetized yet. And there’s a chance GOOG could capture as much as 10% of the $600 billion advertising market.
A company with $60 billion in revenues but still has only a $200 billion market cap is cheap, Cramer said. Plus, Google has room to grow because the internet search/ad giant holds only a fifth of the potential market share Cramer expects.
Investors need to let go of the dot-com-era hangover. Ever since that time, high-priced stocks have seemed illegitimate and unsustainable. But Google is a real company with real earnings that can be valued just like any other stock, Cramer said.
Cramer estimates that Google will earn $20 a share. The company is a consistent 30% a year grower, he said, which puts its multiple at about 37 times earnings. That’s how he came up with his $750 target.
But a look at other growth companies at least somewhat close to Google shows that $750 could go much higher. Hologic grows at 29% a year and gets a 44 multiple. Google would be worth $880 with that number. Intuitive Surgical grows at 40% and gets a 100 multiple. If that’s cut by a quarter to equal Google’s growth rate, the cost for one share of GOOG is still $1,500.
“My price target is $750,” Cramer said, “but I have to believe that GOOG is going much higher, even if I can’t say so.”
Jim’s charitable trust owns Hologic.
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