Google Gets A Downgrade!

Larry Page

Wall Street bank Stifel Nicolaus just downgraded Google from a buy to a hold. 

Why?

A few reasons:

  • Google’s search business is maturing. That’s true. It’s still growing, but basically as fast as the rest of the internet. Also, ad budgets are going to be constrained because of the bad economy.
  • Google spends crazy money on crazy acquisitions. Google’s Motorola buy clearly has Wall Street spooked. Without getting into whether the acquisition makes sense, Stifel Nicolaus writes such big acquisitions are going to distract management from the core business, and that other big ambitious buys like that are likely. 
  • And here’s the kicker: Facebook is basically king of the internet now. People are spending more and more time on Facebook, and that means ad spending will go to Facebook, not Google, especially given the fact that ad budgets are flagging because of the economy. The king is dead, long live the king.

Ouch.

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