Dow Jones 9848.95 -16.81 9:20 am PST, October 22, 2004  NASDAQ 1938.68 -14.94 For info, visit access.smallcapnetwork.com S & P 500 1105.07 -1.42 Change your subscription status here Russell 2000 575.71 -0.95 VOLUME 04: ISSUE 85  Feature: Google Goes Nuts: Yahoo! I was one of those who smugly scoffed when Google (NASDAQ: GOOG) IPO'd at $85. Undaunted, I continued to scoff as the shares doubled in a scant few weeks. It's one I don't mind missing. I may have been wrong, but at least I'm consistent. If you'd have told me that Google would be $170 two months later, well, it is too laugh. That said I just don't see it. Although GOOG's quarterly revenues and earnings released yesterday were decent--here if you must: http://biz.yahoo.com/bw/041021/215971_1.html -- the current facts are that the company is forecast to make $2.80 a share in fiscal 2005 which indicates a p/e of 60-plus times at the current $170 level. As well, over the next six to twelve months, some of the share lockups come off which will allow insiders and others to sell. Wouldn't you?  Insiders hold over 170 million shares or 63 percent of the shares outstanding. Institutions hold roughly one third of one percent. There is a paltry $7 a share in cash per share; the public float is 100 million. The market cap is now pushing $48 billion. Yowsers... It's hard to get a technical handle on the shares as they have only been trading since mid-August. The rise has done one thing; unleashed an almost prurient interest in the whole sector of Internet search engines. Go figure. Of course, years ago, I will admit that I didn't think Amazon (NASDAQ: AMZN) would make it either.   So what about Yahoo? The shares have moved from $25 to $35 since Google IPO'd. The consensus earnings estimate for fiscal 2005 is around 50 cents. That's a future p/e of 70 times against Yahoo's current price. While Google is--for now-- growing faster than Yahoo, which may change, there is little doubt that this fledgling sector has caught fire. Internet search ads and banner advertising are doubtless here to stay and tagged for significant growth. But how far out are these heady prices already discounting?   Googling for Dollars. While investors are googling these companies for future guidance, there is none. Both Google and Yahoo are slugging it out for dominance in the search genre by quickly entering new businesses and acquiring complimentary technologies/companies. Sound familiar? Could the prices of these two be getting a tad ahead of reality? You be the judge. On a relative price basis, Google is actually cheaper than Yahoo, although the latter is obviously the more quantifiable as it actually has a lengthy trading history. The mo-mo that now pervades the 'sector' could get vaporize or just get plain ugly if there are any failures to deliver against expectations or a market correction. Or investors simply get bored or move on, which is the more likely eventuality. I find it incredulous that the talking heads can rationalize the prices on either stock. The only coherent rationalization is that prices will rise until the market says enough.  Bubblicious? Do you notice more and more of this kind of market activity happening? While not yet reminiscent of the heady bubble days, there is little doubt that investors are once again looking for the next big thing and will pay well over the odds to be in the game. All eyes are on Google just now, and ultimately that's not a good thing. If Microsoft (NASDAQ: MSFT) were trading at even half the projected p/e of either Google or Yahoo, the former wouldn't be trading at $28; Mister Softee would be nearly $55 a pop. Not likely to happen in the medium term. In my mind, the risk isn't that Google and Yahoo could go higher--they could. The risk is that, as with Yahoo years ago, the public investor once again gets left holding the bag. I'd rather miss the boat--especially at these levels--than potentially hold that bag. Call me crazy, but experience tells me that it could well be years before these shares, especially Google, will create earnings that justify today's price. There are just too many other stocks out there that make more sense.     We Value Your Feedback Got comments, questions or suggestions? Send 'em on over: Editor@smallcapnetwork.com If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 3525 Del Mar Heights Rd #334 San Diego, CA 92130 Unsubscribe Here D I S C L A I M E R: The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. 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