Paper: Google 'Overvalued' at $500 Per Share

Financial weekly Barron's said Sunday that shares of Google would likely fall from their lofty USD $500-plus price point set last week, triggering a sharp sell-off of the stock in Monday morning trading in New York.

The paper gave several reasons for its analysis. First, it said that the company currently is valued at some 37 times the expected earnings for 2007. Second, Google's growth has slowed considerably in recent months. Additionally, it is overvalued when compared with companies of similar sites.

Google shareholders seemed spooked by the news, selling off the stock in somewhat heavy trading Monday. By noon, the stock had fallen nearly three percent to $491.21, off $13.79.

The Mountain View, Calif. search company also has several factors working against it as it enters the new year. Expenses are expected to increase, however slowing revenue growth may not be able to offset the additional costs.

Furthermore, online advertising rates are falling, which has long been considered a key portion of the Google business. Thus, analysts are expecting much more modest growth -- 33 percent -- compared with the 81 percent expected growth rate for 2006.