Could Google Become a Buy?

Google's launch of GBuy under the name Google Checkout is, as I've written before, mainly a defensive move.

In order to deal with spammers and scammers who are rendering AdSense into NonSense, Google is putting in a system that will let it not only move into transaction processing but give it detailed merchant information, the kind of information that will let it identify real businesses from frauds.

Everyone in the media is asking themselves, "who does this kill?" Most say it kills eBay. It doesn't. Techdirt thinks it kills Amazon. It doesn't. Online revenues continue growing, in every direction. The Internet is simply a more-efficient distribution medium, and over time that efficiency tells.

The real question to be asking is, does this make Google stock a real buy? (The chart above is the one-year chart of Google, from Yahoo.)

While the value of Google stock is up 25% from the astronomical heights of a year ago, the company has actually been undergoing significant earnings compression. It now trades at about 73 times earnings. It now has a track record with real earnings momentum. Now it has something that, potentially, defends what it has and gives it a chance to make more, not just for itself but for Froogle merchants.

So what's the problem?

The problem is that all this remains speculative. Google is a good company but a very speculative stock. It may pay off, but there are real risks. Banking risks, for one thing. There are risks from government, not just the U.S. government either. There are growing legal risks doing business online. There is growing competition from Microsoft, and Yahoo, eBay and Amazon, too.

But if you're an investor who can stand substantial risk, Google may now be worth a flyer. Which is a lot more than I ever said before.