NEW YORK – To all of the Wall Street naysayers, the talking heads and the bearish doubters, Cyndi Mackell and her 120 shares of Google Inc. have something to say.
“Told you so!” she said with a laugh.
Mackell and other individual investors who jumped at the chance to buy Google stock in the company’s initial public offering two months ago can be forgiven for a certain amount of smugness. Having bought shares at $85, Google investors have more than doubled their money and have silenced the numerous critics of Google’s Dutch auction IPO.
“The fact that they surprised the market does not surprise me, as it’s apparent the market has continuously underestimated the opportunity for Google,” said Jake Kaldenbaugh, a business development manager in San Francisco.
Since its IPO on Aug. 19, Google has seen one of the most impressive runups in share price since the heyday of the dot-com era – a 114 percent jump from its offering price as of Tuesday’s close. But unlike the dot-com era, few investors seem to be cashing out for the quick buck.
“The number of people who have bought Google and held on to it is really surprising,” said Jeff Seely, chief executive officer of Sharebuilder.com, an online brokerage that allows individual investors to accumulate shares through regular partial payments. “It’s a new stock, but it’s regularly in our top 10 stocks that our customers want to accumulate.”
Seely said that of the more than 5,000 Sharebuilder.com customers who have accumulated Google stock, only 13 percent have sold part or all of their shares.
“I think it shows a lot of maturity among investors, and it certainly shows that Google has matured as a stock,” Seely said.
Back in August, it was easy to underestimate Google as a risky, immature company. When it announced a target price of $108 to $135 per share, conventional wisdom held that the price was way too high, and would discourage the mom-and-pop investors that Google seemed to target with its open auction.
When Google lowered its target price to $85 to $95 a share just before going public, analysts felt that the auction system had failed miserably. A final price of $85 seemed to justify the feeling. Where was the investor confidence in Google if they had bid it down that low?
On Aug. 19, Google let its stock do the talking. GOOG opened at $100.01 its first day of trading and has steadily risen ever since, closing at $149.38 on Oct. 21, right before its earnings report was released.
The earnings report was really the last chance for the company’s detractors to make a stand, but Google silenced them. For the third quarter, Google earned 70 cents a share, far outstripping Wall Street’s expectations of 59 cents. The company brought in $805.9 million in revenues, more than twice the $393.9 million from the third quarter a year ago.
“For me, that was the point when I knew I had made the best investment decision of my life,” said Mackell, a Philadelphia native working in Venezuela. “When everybody was saying it was too risky or too unknown, I knew it would be good, and I was right.”
Earnings like that could not be argued with. The next morning, Prudential Securities, which had already rated Google a “buy,” increased its price target on the company to $200 a share. At the start of trading on Oct. 22, Google opened at $170.32 and closed at $172.43. On Monday, it climbed to an intraday high of $194.43, and closed Tuesday at $181.50, down $5.60, after a typical spate of post-earnings profit-taking.
Of course, if the dot-com era taught us anything, it’s that there’s always the chance that any stock could tank in a relatively short amount of time, and the risk of investing in any stock certainly applies to Google. However, despite the chance to turn a fast profit, few Google investors appear to be in any mood to sell.
“I’m planning to sit on this one,” said Vuong Khan, a technology worker from New Jersey who bought 44 shares in the Dutch auction. His $3,740 stake in Google is now worth $7,986. “You buy a stock like this to hold on to and watch it grow.”
Mackell is adamant about holding on to her shares, despite her substantial gains. She purchased 120 shares in the auction for $85 each, paying $10,200, not including any fees from her broker. As of Tuesday’s close, her shares were worth $21,780 – a profit of $11,580.
“I can’t imagine selling, at least not for a while,” Mackell said. “I think there’s still potential there. Their numbers are very good, and I’m very optimistic about their future earnings.”
Spoken like a true investor.
Associated Press
Google investors have more than doubled their money from the company’s Dutch auction IPO in August.
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