Google Recaptures 5th Spot On Most Valuable U.S. Companies List

Nearly two years ago I wrote about internet search giant Google (GOOG) seeing its stock price surpass $700 per share, and as a result, become the fifth most valuable U.S. company in terms of equity market value. Shortly thereafter the recession hit and Google shares tumbled with everything else. The stock is making a comeback though, after reporting strong third quarter earnings last night. Analysts are once again very bullish, boosting their target prices today.

With the stock up $21 today, Google has reached $550 per share and has now returned to fifth place on the most valuable company list, as you can see below.

topusfirms1009My main question has not really changed over the last two years. Does Google deserve to be number five, or will we look back five or ten years from now and realize that being a leader in internet search and advertising (while certainly an impressive feat) doesn’t really translate into a company being valued nearly the same as some of the others on this list.

Full Disclosure: Some Peridot clients have been long Google over the last two years, and some still own it, but I have been cutting back the positions as the stock’s forward P/E ratio has gotten back over 20 (currently about 22).

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7 Thoughts on “Google Recaptures 5th Spot On Most Valuable U.S. Companies List

  1. As a leader in online advertising they wouldn’t deserve 5th place, no.

    But as a leader in online search, OMG, Google has been my home page since about 2000 and there isn’t a single day in the year – to my shame – in which I do not use it.

    To the shame of both Microsoft and IBM I don’t quite see why they can’t replicate the same search efficiency that Google has. I really don’t. Altavista was almost there.

  2. Patrick McVeigh on October 16, 2009 at 11:37 PM said:

    Google provides a lot more value to most people’s lives than does Microsoft which has done nothing innovative in the past ten years. The real question is not why Google deserves to be number five, but why does Microsoft deserve to be number two?

  3. I respectfully disagree.

    Appreciating what Google has done should not be used to depreciate what Microsoft has.

    Last time I tried Linux – I think it was RedHat, but it may have been Suse – it has come a long way in terms of installation ease, but its interface was still somewhat clunky, apparently similar to Windows XP and application titles were all 4-5 letter acronyms that only hardcore fans knew the meanings of. I could get around only because of my long experience and apparent similarity with XP…my mother most certainly could not.

    Microsoft has one of the best if not *the* best development tools available in IT and fully deserves the huge developer base it enjoys.

    Around 2000 when I looked at what servers and technologies should I use for building our corporate website Microsoft has books, samples and knowledge bases on ASP already out. It’s working to date…admittingly falling behind today’s trands, but that’s almost 10 years on Microsoft technologies…and it’s still rock solid.

    This is not to say PHP or MySQL or Linux or Oracle do not deserve to be recognized. They do and they are.

    Microsoft, apparently, has managed to do it better than all of them.

    Someone has to be on the top….for now it’s Microsoft.

    I expect that to change in 2-5 years.

  4. Hi Chad,
    Why limit your list only to U.S.-based companies? The whole world is our investing opportunity. Besides, most of the companies on your list receive more revenues from outside the U.S. than from within. Care to guess where Google ranks among all worldwide companies?
    Jeff

  5. Great post. I took a lot from this. The list shows what Americans ultimately value.

    Anyone else surprised that Apple was #7? I would have thought they would be top #5?

    Tegan
    This is a link

  6. You can hardly conclude “what Americans ultimately value” from this list.

    I don’t know numbers, but I dare guess that at least half of those companies have half or more of their revenue from international operations.

  7. Using Google has become a daily habit for most people. Other search engines can try to get better, but it still would be hard to break the habit people have of using Google.

    Having 60 – 70% of search traffic on the internet is very valuable as their advertising earnings show. Once ad prices online mature, the value of Google will be even greater – in my opinion.

    The biggest threat is that people will stop using Google. It is not easy to stop using oil or the operating system on your computer, but new technology or a competitor could rapidly change the daily habit of people when they go online. It would be very difficult, but the risk for Google is higher compared to other companies on this list.

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