Monday, March 13, 2006

Google: Blame Slowing Growth, Not the CFO

Last week, when I appeared on Kudlow & Co. on CNBC, the subject of Google came up. Although I expressed my view that the stock is still overvalued despite its precipitous fall, the discussion focused more on the CFO's blunders. It seems that many investors blame CFO George Reyes for causing the stock to fall. Mr. Reyes has certainly made some mistakes--most notably incorrectly estimating taxes--but you can't blame him for the stock's recent weakness.

The bottom line is that no stock--not even Google--can double revenues on a year-over-year basis ad infinitum. Yet, Google was priced as if it could. The stock is falling for one reason and one reason only: Investors have finally realized that growth is slowing. You can't blame the CFO for that.