those would have been the good trades for today
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GOOG today
- Thread starter Walther
- Start date
"Stock splits have no effect on P/E."
You are right on the first day of the split. Once it looks cheap because of the stock split and the fact that the stock will look cheaper, the price will go higher and the P/E will increase.
Say at 390 if the have a 3/1 split the stock should trade at 130 but psychology of the traders will push it to 150 which is 450 pre split and P/E will increase. This will happen because of many reasons.
1- Psychology
2- More investors will afford to buy it
You are right on the first day of the split. Once it looks cheap because of the stock split and the fact that the stock will look cheaper, the price will go higher and the P/E will increase.
Say at 390 if the have a 3/1 split the stock should trade at 130 but psychology of the traders will push it to 150 which is 450 pre split and P/E will increase. This will happen because of many reasons.
1- Psychology
2- More investors will afford to buy it
GOOG Estimates Raised:
GOOG Google: Thomas Weisel comments on offering (394.98 )
Thomas Weisel notes that GOOG announced that that it would sell 5.3 mln Class A shares, raising approximately $2 bln in net proceeds at today's closing price. Given Google's high P/E ratio and the increased interest rate environment, they say the deal, which should close in early 2Q05, is expected to be accretive to FY06 and FY07 EPS by $0.03 and $0.02, respectively. As a result, firm is increasing their 2006 & 2007 EPS estimates accordingly. Given that Google just raised $4 bln in September and the co should end 1Q05 with over $7.5 bln in cash and equivalents (assuming the AOL deal is already closed), they say the timing of the deal is curious. They note that GOOG already has a cash balance larger than most of its competitors and growing significantly. While they believe the co may ultimately use the funds to gain share in Asia and/or invest in new search verticals or business line, they believe the offering could simply have been consummated because GOOG viewed its inclusion into the S&P 500 as a lower cost way to raise capital because it would be positioned to give less of a discount to investors.
GOOG Google: Thomas Weisel comments on offering (394.98 )
Thomas Weisel notes that GOOG announced that that it would sell 5.3 mln Class A shares, raising approximately $2 bln in net proceeds at today's closing price. Given Google's high P/E ratio and the increased interest rate environment, they say the deal, which should close in early 2Q05, is expected to be accretive to FY06 and FY07 EPS by $0.03 and $0.02, respectively. As a result, firm is increasing their 2006 & 2007 EPS estimates accordingly. Given that Google just raised $4 bln in September and the co should end 1Q05 with over $7.5 bln in cash and equivalents (assuming the AOL deal is already closed), they say the timing of the deal is curious. They note that GOOG already has a cash balance larger than most of its competitors and growing significantly. While they believe the co may ultimately use the funds to gain share in Asia and/or invest in new search verticals or business line, they believe the offering could simply have been consummated because GOOG viewed its inclusion into the S&P 500 as a lower cost way to raise capital because it would be positioned to give less of a discount to investors.