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Google down $100 billion since November!

Published
by
Sam Stewart
on September 11, 2008
in Stocks and valuation
. Comments

Google fell to a 52 week low today of $409.68 before closing at $414.16. This is well below the $747.24 it reached last November.

To put this into perspective Google is worth approximately $100 billion less today than it was in early November 2007. This decline in value is the same as:

Does anybody know what Google is really worth?

According to the 28 analysts aggregated by Yahoo! Finance Google’s target price is somewhere between $475 and $785 with a median of $617.50. I know valuation is a subjective exercise and everybody has their unique model and forecasts but this range is crazy. The difference between the top target price and bottom target price is nearly $100 billion of value (remember that is 4x Yahoo!).

I am the first to admit that I don’t how much Google is worth. Last year I thought Google was over valued at $600 but they climbed to $747.24. I think Google’s core search advertising business is great and still has  growth potential but I think it is difficult to quantify the potential of opportunities in online video, the mobile web and the other areas Google is investing in.

In June Mark published a useful scenario analysis approach to Google’s valuation using Valuecruncher. You can create your own valuation of Google using Valuecruncher here. You have a pretty good chance of getting closer to Google’s value than at least half the analysts covered by Yahoo! Finance.

View the full GOOG chart at Wikinvest

Disclosure: I am a co-founder and shareholder in valuecruncher.com

Recreational jet packs a $6 billion market?

Published
by
Sam Stewart
on September 9, 2008
in Startup, Venture Capital and valuation
. Comments

Christchurch based Martin Aircraft Company (MAC) recently demonstrated a prototype of their personal jet pack at a leading US airshow in Wisconsin. The demonstration was the culmination of 20+ years work by former Otago University student Glenn Martin. The demonstration flight below is a little underwhelming due in part to a last minute pilot change. Extended demonstration footage is available here.

Martin Jet Pack Quick Stats

  • Weight: 115kg (254 lbs)
  • Height: 5ft
  • Width: 5ft
  • Flight time: 30 mins
  • Cost: $100,000 (US Dollars)
  • A condition of purchase includes undertaking a MAC training and certification process.
  • more

MAC speculates that there could be a market for up to 60,000 jet packs as recreational toys in the next eight years. The company acknowledge implementing the production capacity to meet this demand would be a challenge. At $100,000 US a unit this equates to a potential $6 billion opportunity.

Over the last 4 years Wellington based venture capital firm No 8 Ventures has been backing the project. No 8 founder Jenny Morel thinks the MAC need $20 million to invest in production facilities, staff and IP protection. Raising venture capital is hard work and finding this amount of money at this stage of the company’s life in New Zealand will be a challenge.

How many jet packs does MAC need to sell in 2016?

Based on a post money valuation of $30 million (i.e. in return for investing $20 million you get two thirds of the company) and the following assumptions

  • Required return on investment: 10x
  • Future price/sales valuation ratio: 0.94 (aerospace/defense industry average)
  • Price per unit: $100,000 US
  • Ignoring potential dilution or follow on investments

Implies annual sales in 2016 of ~3,200 units. Based on today’s price this is $320 million in annual sales or ~5% of the potential recreational market (total market not annual sales) identified by MAC.

Post money valuations $25 million (80% of the company) and $40 million (50% of the company) imply 2016 annual sales of approximately 2,700 and 4,300 units respectively.

Note: These are rough back of the envelope calculations based on subjective estimates of uncertain variables.

My initial reaction was that these seemed like large numbers and given the technology, production, compliance and sales challenges ahead rasing $20 million will be a hard sell. The counter argument is that in 10 years time the marquee event at the X Games could be jet pack racing and/or I am flying to work at Spacely Space Sprockets wearing my Martin Jet Pack.

Whatever happens good luck to Martin Aircraft Company and I would love to try the jet pack out.