NEW YORK (Reuters) - Google Inc. (GOOG.O) shares, which topped a milestone price of $500 a share last week, are overvalued and poised to fall, just like peers Amazon.com Inc. (AMZN.O) and eBay Inc. (EBAY.O) did, the weekly financial newspaper Barron’s reported on Sunday.
Barron’s said Google is overvalued because it trades at 37 times next year’s expected earnings and because its growth rate is slowing. It also noted that Google now has the 15th largest market capitalization among U.S.-traded shares, and its price-to-earnings ratio is two to three times higher that of similarly sized companies.
Analysts predicted a 33 percent gain in Google’s earnings in 2007, versus the 81 percent increase the company is on track to produce this year, Barron’s said.
The paper added that the price that advertisers are willing to pay for search keywords has fallen.
Slowing revenue growth would be painful for Google, Barron’s said, because of its rising expenses.
Spending on research and development, sales and marketing and general and administrative expenses are all expected to outpace revenue growth this year, Barron’s said.