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After nearing $300, Google shares lure buyers again

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Did Google Inc.’s stock finally just get too cheap?

At its intraday low this morning of $309 a share, the Internet search giant was selling for a mere 13.5 times estimated 2009 earnings per share.

That used to be the kind of unexciting price-to-earnings ratio that investors assigned to aging companies with modest growth prospects.

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At $309, the stock was retesting its three-year lows reached in the market sell-off last Friday, and was down 58% from its record high of nearly $742 in November 2007. The shares rebounded with the broad market in today’s session and closed at $353, up $13.85 from Wednesday.

After regular trading ended the company reported a 26% jump in third-quarter earnings, beating expectations.

The shares surged to $390 in after-hours trading, which just put them back to where they were on Oct. 2.

Wall Street analysts’ consensus estimate is for Google to earn $19.37 a share this year and $22.83 in 2009, for a growth rate of about 18%.

Naturally, with the economy sinking, the market has doubts about Google’s earnings power in 2009. That helps explain the relatively low P/E. And given the company’s already dominant position in the Internet search market, many investors wonder about the longer-term growth picture.

What’s more, as cheap as Google may appear to be, many tech giants have even lower P/Es. At $24.19 a share, Microsoft Corp. is selling for 11.3 times estimated fiscal 2009 earnings. IBM Corp. sells for 9.7 times its 2009 estimate.

Still at the high end of the P/E range: Apple Inc., which at $101.89 is priced at about 18 times 2009 estimated profit per share.

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