Google Reports 2nd Quarter 2009 Record Earnings But Revenues Flat

Google reported 2nd quarter earnings Thursday to a mixed review. Although analysts loved the record earnings, revenues were only 3% over the same quarter last year. Is the stock too rich up here?

Back in March, I suggested that Google was not a buy above $400.

Although the stock soared to $450, it still to me is too rich of a stock. Three percent same quarter revenue growth is flat line growth to me. It doesn't scream out "buy". If the company goes out and reduces headcount by 200 people (1%) you can see how they saved off expenses. Assume each salesperson makes $100,000 per year. Do the math and we arrive at $20 million cost savings.

I'm sure we could dig in deeper on just how Google made record earnings and you'll likely come to the conclusion that this came about from cost cutting. Whatever it takes to make profits look good eh?

But what would concern me the most is that the Price to Earnings (P/E) ratio at 33 is far too pricey for the stock. Let's face it, the economy is hurting everyone and ad spending is down. Companies should be commended for trying to hold profits up. But that doesn't mean their valuations deserve steep prices.

Looking at Google's stock chart, it likely will pullback and go sideways for a while. I'd look for $360 levels to be a fair price down the road.