• Silicon Alley Insider, Tuesday, September 30, 2008 1 PM

Google's stock has dropped below $400. So it's a good time to revisit the company's valuation, according to Silicon Alley Insider's Henry Blodget.

Google's enterprise value is about $125 billion and the company will generate about $4.5 billion of free cash flow this year. Google is therefore trading at about 27X current free cash flow. This multiple is still on the high side, but it is far more reasonable than Google's valuation than anytime in the last few years, Blodget said, adding that a fair multiple for Google is about 20X-25X ($300-$375), and we're finally close to that range.

What does this mean? It means Google's stock is finally getting to the level where there should be good downside valuation support. Wall Street still expects a lot from Google, and Blodget said he can't see the stock resuming a sustainable upward course until expectations are once again low enough that the company can beat them.

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