[Full Disclosure: This post is about Google & the stock market. I currently hold Google stocks in my portfolio. This is by no means investment advice. It’s just my response to a recent article.]
Tech Crunch recently posted an article the other day about Google stock options dropping in value by a whopping 60%! I thought this was an interesting angle about the recent stock market crash. When most of us investors were worried about the general decline of the economy, and swooping in to pick up some bargains. It seems that one of the tech industries strongest players may have an Achilles heel.
Although analysts have downgraded Google’s stock to a ‘hold’, I am optimistic about Google’s overall performance in this downturn. Especially since PPC advertising is one of the most effective forms of direct advertising there is today. Logically if there are any shifts in marketing budgets, I anticipate that much more of those budgets would be allocated to measurable marketing activities such as PPC.
However, Tech Crunch may have found a small, yet concerning angle. Google has declined approximately 58% from their 52 week high at $747/stock. That makes some of the employee stock options either near or below their strike price, making them practically worthless. Which could be a potential cause for some Google employees to leave the company.
But before you dump your Google stocks and consider Google a dud, consider this…
- Google is still the most dominant player in search today. Even though analysts predict a plateauing effect in search revenue in the coming year. Let’s face it, Google still has roughly 60-70% of the search engine market.
- If Google employees left, where would they go? There are some tough times ahead and this is probably not the best time to start job hunting. Start up money is drying up and most companies are cutting back on some new headcount until the economy stabilizes.
- Google stocks are bound to pick up once the economy stabilizes. Google is still a quality company and once the market picks up the strongest players in their industries will rise up as well.
If this happened to a lesser company with really poor underlying fundamentals then sure, a 60% drop in stock options should ring some alarm bells. But this is Google, not (ahem Yahoo). So no, even though on the surface it may look like this stock option issue might be a concern, in reality maybe not so much?