Google tops $600, but $700 may be harder to hit

Google Inc shares rose from $500 to $600 in 11 months. The next $100 gain may take longer.

Google extended its lead in Internet search and added new products, fueling the stock's rally. For the next growth spurt, the company is relying on its planned purchase of DoubleClick Inc, giving it access to banner advertising and other display ads, said Lehman Brothers analyst Doug Anmuth.

"They're so far ahead in search, but to really maximize the opportunity long term they need to get there in display and do it through DoubleClick," said the New York-based analyst. Though he rates the shares "outperform", Anmuth only expects them to reach $610 in a year and wouldn't say if he plans to raise his target.

While 34 of 37 analysts tracked by Bloomberg recommend buying Google, their price targets indicate more skepticism. Of the 28 analysts with 12-month price goals, 19 have forecasts below $625 and only two see the stock reaching $700.

Google, based in Mountain View, California, surpassed $600 for the first time on Monday. The shares rose $15.57 to $609.62 at 4 pm New York time on the NASDAQ Stock Market and have surged more than sevenfold since they were first sold to the public in August 2004.

Anmuth boosted his price forecast from $560 in April. A year earlier, he raised the estimate to $530 from $450. The stock surpassed that level in June of this year.

Google plans to release third-quarter earnings next week.

Bear Stearns & Co's Robert Peck wrote in an October 5 report that Google shares will reach $700 by the end of 2008, helped by increased ad spending on its YouTube video site. ThinkEquity Partners' Darren Aftahi, the other analyst with a $700 price target, set that goal when he started coverage of Google in August.

YouTube

Google purchased YouTube for $1.65 billion last year and started showing ads in the site's video clips in August. The $3.1 billion acquisition of DoubleClick, announced in April, is under regulatory review. Companies such as Microsoft Corp have complained that the deal would give Google too much control over the Web advertising market.

Should the acquisition be rejected, "you'll see a pullback in the stock", Anmuth said.

Google has also introduced technology for advertising on mobile phones and other wireless devices. The company may unveil software this year that would rely on open-source programs to run mobile phones, the New York Times reported, citing industry executives with knowledge of the project.

First $600 prediction

The first analyst to predict Google would reach $600 was Credit Suisse's Heath Terry, who raised his estimate from $500 in November 2006. Terry, who didn't return a call seeking comment, hasn't increased his forecast since then.

The top-ranked analysts by Institutional Investor magazine are Anthony Noto of Goldman, Sachs & Co and JPMorgan Chase & Co's Imran Khan. Noto has a $620 target for Google shares, while Khan doesn't have a forecast.

Google's share of Internet queries increased to 56.5 percent in August from 55.2 percent the previous month, according to Reston, Virginia-based research firm ComScore Inc. Yahoo! Inc, based in Sunnyvale, California, fell to 23.3 percent, while Microsoft dropped to 11.3 percent from 12.3 percent.

Bloomberg News

(China Daily 10/10/2007 page16)