The Case for GOOG at $5,000

Gordon Scott |

Surely, the mere publication of an article so titled would spell a top for most stocks. But suspend your disbelief for a moment and consider the question: could shares of Google (GOOG) sport a price tag of $5,000 sometime in the next 15 years? How about 10 years, or even 5? Those numbers might sound sound fanciful today, but in reality they are not so far off when you consider a few things.  Personally, I like the idea of a $3,000 price target within the next five years, but $5,000 and beyond is not out of the question for 10 or 15 years down the road.

Don't Overlook the Splits

If you factor in the effect of splits, Apple (AAPL) has risen over 5,000% in the last 15 years—and that’s right in the middle of this generation’s worst secular bear market. Perhaps you are thinking to yourself, “yeah but that’s Apple, and iPods and iPads and a once-in-a-lifetime CEO.”  And you have a point.

But to make that point you’d be overlooking the performances of Jeff Bezos and Amazon (AMZN). That company’s stock, split-adjusted, has risen an eye-popping 17,000% over the last 15 years.  Even stodgy old IBM has outperformed GOOG over the past 5 years shown in this chart below.

Now if the company never split its shares, and if the company were to experience growth during the next 5 years akin to what AAPL and AMZN experienced in the last 5 years, then a 500% increase in price would put the stock right around $3,000 per share.  Still sounds like fantasy to you? There is more evidence, both technical and fundamental, for this point of view.

Don't forget the big picture

Consider the fact that stocks may be grossly undervalued right now, in comparison to long-term market trends. That idea was articulated just two days ago here. Consider also that a pent-up  demand for returns, fueled by the lagging inflationary effects of Tarp, QE2 and Operation Twist, could easily spring-load the markets for a new secular bull run.

Google, it's not just a name, it's a verb.

Of course, GOOG could also have an experience similar to that of Akamai’s and lose 45% of its price over the next five years.  But that seems hard to imagine for a company whose brand has entered the colloquial lexicon faster than you can teach the world to sing about Coca-Cola. The last earnings report showed that Google’s management has an unparalleled understanding of the value of employee resources, a clear understanding of its value as a company to its customers, and a clarion vision of the value of technology in an ever-changing world. Put these things together and you have the recipe for a company being in the right place at the right time in history.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 112.77 -0.11 -0.10 1,555,509
AKAM Akamai Technologies Inc. 52.12 0.36 0.70 31,039
AMZN Amazon.com Inc. 802.28 3.12 0.39 176,451
EBAY eBay Inc. 31.92 0.25 0.79 145,855
GOOG Alphabet Inc. 776.51 2.30 0.30 67,149
IBM International Business Machines Corp 154.69 0.71 0.46 142,920
PBI.P Pitney Bowes Inc. 2.12 Conv. Pfd. n/a n/a n/a 0

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