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Monday, August 28, 2006

Google’s Difference: Yahoo!, eBay And Amazon.


Google stock chart looks a lot like a chart of its revenue. Almost straight up. Beginning at about $100 in Fall 2004, it moves up in steps to $475 in January 2006. It then has traded a bit either side of $400 since then and now sits at $374.

The charts of Yahoo!, eBay, Google were hit with an ugly stick sometime between January 2005 and January 2006. Yahoo! hit almost $44 early this year, and now trades at $29. eBay traded close to $60 at the beginning of 2005 and now sits at $25. And, Amazon traded at $50 late last year and is now at $28.

Wall St. no longer believes that the three grandfathers of the internet age are growing fast enough to justify premium prices anymore. And, a look at the August short interest in each company drives the point home even more strongly.

The short interest in Google was 5.819 million on August 15. The stock trades 6.376 million shares a day, so the short coverage ratio is less than a day. Short interest also dropped 3% from July.

Yahoo!’s stock had 92.209 million shares short as of mid-August, up 6% from the previous month. The stock trades only 30.109 million shares a day, so the coverage ratio is over 3 times.

Amazon’s short interest rose 10% from July to August to hit 40.229 million. The stock trades 12.139 million shares a day, so the short coverage ratio is, like Yahoo!, north of three times.

Over at eBay short interest rose 3% to 51.412 million. The average number of shares a day traded for eBay is 20.735 million.

Supporters of eBay, Yahoo!, and Amazon point out that they are still the dominant companies in their sectors of the new online world and that taking away their core business will be difficult for competitors. They will argue that Google has not made money from anything other than search advertising and that its products that compete with Yahoo!’s content, eBay’s auction and payment properties and Amazon’s e-commerce platform are new and untried.

Tell that to the shorts.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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