Fifteen Most Overvalued Stocks: Google

Stocks:  (GOOG)(MSFT)

Google is an easy tarket in the world of overvalued securites. No matter how well it has done, and its has done extraordinarily well, it is still a one trick pony. The slightest stumble in its text ad driven model will cut its valuation in an instant.

Google’s stock is up from it IPO price of $85 to over $500. In a bit over two years.

Google has several problems, but the press tends to shy away from them. Google is the market’s darling.

One of Google’s most pressing issues is that all of its diversification outside its core search business has done almost nothing to bring in new revenue. Microsoft has recently made the case that companies are not likely to want Google’s new spreadsheet and word processing applications. They are simply not robust enought. Google’s entry into the only financial information business has been a bust. Google Finance is not even listed among the top 20 financial news destinations in studies by Comscore and Nielsen/NetRatings.

Google Earth and products like its photo storage and sharing business rank wll behind other companies like Photobucket. And, the jury will be out for some time on whether the company’s purchase of YouTube makes sense. While the acquisition will help Google keep first place in the online video business, it is not clear that advertisers will embrace the model. And, video content owners like the TV and film industries are upset that YouTube users post valuable programming at the site. Universal Music has already said that YouTube owes it millions of dollars for posts of its content.

Content may be Google’s biggest challenge. Video is not the only issue. A number of print companies feel that Google may violate the "fair use" provision of the law in its aggregation and linking to news content. One of the largest news agencies in Europe has sued Google over the matter, and that may be the tip of the iceberg.

While it is unclear whether Google will win the battles with content owners or make some peace with them and it is also not certain that Google can makes money with a number of its new software applications, the high stock price is a big risk.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.