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Google Is Great

Tuesday, 23 Oct 2007 | 10:16 AM ET

Despite the Dow dropping 366 points on Friday and the Nasdaq dipping 74, Google held its ground. It’s that kind of stock – the kind not even a blood-red tape can touch – that investors want to own, Cramer said. All that and it’s cheap too.

Growth Engine
Mad Money host Jim Cramer shares insight on Google stock.

Google reported a blowout quarter Thursday after the bell – 46% growth – and opened up more than $14 on Friday to climb to about $654. And even after the carnage in the markets the stock still only gave back 10 points. If it weren’t for such a horrible environment, Cramer thinks GOOG would have shot right through its 52-week high of $658 and gone straight to $675.

And don’t let the $600+ share price scare you. Google is trading at about 32 times earnings, despite a growth rate of 34%. Remember Cramer’s rule: When the price-to-earnings multiple is equal to or less than the growth rate, that’s a cheap stock. He said there are money managers that would be willing to pay 50 to 60 times earnings for stocks with similar growth to Google.

Those are some reasons Cramer is so fond of Google as a long-term play. But he likes it as a trade this week as well, especially considering Cramer thinks the great earnings report hasn’t been priced into the stock yet. But also, Google has an analyst meeting on Wednesday that should give rise to talk about the company’s much-anticipated phone, social networking and other visionary projects for the future. Cramer said he thinks analysts might use this as an opportunity to raise estimates, which also would be great for the stock.

Looking for a great way to play the recovery from Friday’s horrible decline? Cramer recommends Google.

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

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