I apologize if I'm not making this point very well. The price is a reflection of what the market feels a company is worth in relation to the number of shares that are publically available. The price is not a set value for the company. Look at Berkshire Hathaway. Their class A stock close above $113,000/share today. The outstanding shares, multiple, revenue, growth potential, dividend, management, etc are all factored into the market.

In addition there's a lot of other factors affecting a stock price which have to do with traders. Google's recent run-up has a lot to do with bandwagon jumping and technical signs. There's a LOT of cash that has been sitting on the sidelines waiting for the signs to be right to re-enter the market. That cash has begun its move.

>Hi Jake,
>
>Thanks for the small lesson on the stock market.
>
>More comments in-line...
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>>>Just listening to a show that is exalting Google's share price of over $500. just a few months afer buying non-earning YouTube for $1 billion+.
>>>
>>>I have only a primitive understanding of the stock market, and one very strong characteristic of the stock market, at least over the latter part of my lifetime, is the lemming-like propensity to 'believe in a model' and pour heavy cash into it. Most model turn out to be flawed when put into practise so lots of money is lost.
>>
>>Sounds like you're referring to the Enron or all of your eggs in one basket model. This can either be very rewarding or cripling. Taken as a part of a diversified approach the individual will not be hurt very badly. For example, lets say you've invested 80% in other industries and put 20% into Google. Even if Google goes to 0, you've only lost 20%. The other effect, however, is that the money coming out of Google on the way down must go somewhere. Whether Google is considered as tech or advertising, the decline likely means an economic slowdown, so the cyclicals will be seeing an influx of capital and their shares will rise. Therefore any investment you have there will be a beneficiary.
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>No, I'm referring to Google's "model", which seems to have so much appeal that when it comes to stock prices theirs has no practical limit. Many many other "models" were lavished with lots and lots of $$$, only to see the models fail.
>My common sense tells me, quite clearly, that Google simply cannot be "worth" $500. per share. I realize that the price is set by people wishing to buy at that price. But I just can't see ***any*** advertising company being worth anywhere near that price. Why wouldn't newspapers, magazines, TV and radio all be worth near that value themselves if simple advertising can have such value? Google's "model" is so so so very powerful and unique that only it can command such value?
>
>>
>>>
>>>As I understand it, Google mainly sells advertising space. It apparently has a few other very minor sources of revenue.
>>>Google's smart targeting is highly touted and apparently envied by all other businesses.
>>>
>>>But since when does advertising ONLY make any company worth $500. per share????
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>>The share price is not the value of the company. Exxon is a considerably bigger company yet it's stock is currently $76.
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>Right. So how does one explain that Google, with so very little in the way of tangible assets and their income limited (basically) to advertising only get to be worth so much more??? I doubt, by the way, that Exxon even advertises on Google.
>
>>
>>>Can any advertising company have a stock value of $500+?
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>>Yes. In fact the price could be considerably higher if they :
>>- buy back their shares and thus shrink the available pool.
>>- increase next year's revenue (currently +70% year-over-year)
>>- make further acquisitions which investors believe will increase value
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>But wht you're telling me here Jake is standard stock market shenanigans.
>Is Google's revenue large enough that a 70% 'growth' actually means something? Is there certainty that Google's "revenue" is actually real dollars coming in from sales (maybe its balance sheet footwork to convey something that isn't actually so.
>I wonder how they convinced investors that YouTube will actually increase revenue for Google?
>I'm reminded of one lone young lady who questioned Enron's *real* revenue and value and she was pooh-poohed by anyone of "repute" at the time. It just seems to me that people ought to be asking similar tough questions about Google.
>I'm not at all saying Google is another Enron, in that I have no suspicion that Google is manipulating its books and doing confusion/confounding side-deals that it then links to its balance sheet in phony ways. But I am questioning how large "seasoned" investors can find $500. worth of value in a single stock of Google.
>
>cheers