Google Inc.'s market value briefly surpassed $100 billion for the
first time Friday, its stock scaling new heights after an earnings and
revenue spike that astonished investors.
The online search leader's shares traded as high as $346.43 on the
Nasdaq Stock Market before backtracking as the day progressed. The
shares gained $36.70, or 12.1 percent, to close at $339.90.
The slight retreat left Google's market value $98 billion after just
seven years in business. That was nearly $20 billion above the market
value of Hewlett Packard Co. _ a Silicon Valley pioneer founded 66
years ago.
Google's shares have nearly quadrupled since their initial public
offering at $85 just over 14 months ago _ a stretch that has been
marked by stunning financial growth and a steady stream of new
products designed to lure even more traffic to a search engine that
seems to spit out profits as efficiently as it does answers.
The innovation, combined with media consumption habits that are
shifting more advertising to the Web, paid off in a big way during the
third quarter.
Google's profit, announced after the market closed Thursday, increased
by more than sevenfold to $381.2 million. Excluding advertising
commissions, revenue more than doubled to $1.05 billion.
After crunching the numbers, some of the most optimistic analysts
became even more enthusiastic about Google's prospects.
ThinkEquity Partners analyst John Tinker and Hoefer & Arnett analyst
Martin Pyykkonen both raised their targets for Google shares to $425,
up from $350, while Citigroup analyst Mark Mahaney predicted the
shares would hit $430 within the next year.
"There is definitely a bit of a 'wow factor' here," Pyykkonen said.
"The (company's) earnings are looking better than you could have
imagined in your wildest dreams."
Google probably will make even more money during the next two
quarters, Mahaney said. That's because advertisers typically spend
more during the holidays and people usually are connected to the
Internet more frequently during the dreariness of winter, creating
more opportunities for them to visit Google and click on ads.
Mahaney and other analysts also expect Google's stock to be added to
the Standard & Poor's 500, a move that would provide another lift to
its stock as portfolios tied to that blue-chip index snap up more
shares.
In another bullish sign, Google executives on Thursday said more
Fortune 500 companies are lining up to join an online advertising
network that so far has been dominated by mostly small and
medium-sized businesses.
The company "appears to be tapping into new growth opportunities that
may be just as significant as the ones that it already has tapped
into," Mahaney said.
Google is outperforming Yahoo Inc., the owner the Internet's other
major advertising network, largely because it has developed a formula
to display ads more likely to intrigue its visitors.
That connection to the consumer zeitgeist is generating more
revenue-generating clicks on the ads. Google's system, which relies
heavily on low-cost automation, ensures that a big chunk of revenue
turns into pure profit.
Investors, in turn, have rewarded Google for its technical savvy.
Google is currently worth nearly twice as much as Yahoo, whose market
value during Friday's trading stood at $52 billion.
Although it may seem like everything that Google touches turns to
gold, the Mountain, View, Calif.-based company still faces significant
risks.
"The higher their stock price goes, the more likely that others are
going to spend more money to get a piece of the action," Mahaney said.
Microsoft Corp. and Yahoo already have been investing heavily in
search, hoping to narrow its lead and, more recently, veteran media
mogul Barry Diller entered the space when his InterActiveCorp bought
Ask Jeeves Inc. for $2.3 billion.
Despite the tougher competition, Google remains well ahead of its
rivals, according to comScore Media Metrix and Nielsen/NetRatings.
Although it keeps introducing new products, Google's profits remained
tied to advertising _ a field susceptible to volatile swings of
fortune.
"In terms of prudence, you would like to see other revenue streams,"
Pyykkonen said.
Finally, Google is expanding so quickly that it's bound to test the
management skills of its multibillionaire brain trust _ co-founders
Larry Page and Sergey Brin, along with CEO Eric Schmidt. The company
has been hiring about 10 new employees per day during the past six
months, a spree that's expected to continue for several years.
Friday, though, Google's leadership had little reason to stress.
After the day's big market gains, Page and Brin, both 32, each held
Google stakes worth $12 billion while Schmidt's holdings were worth
$4.7 billion.
Copyright 2005 Associated Press. All right reserved. This material may
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