Google is quickly expanding day by day and for every day that passes they are worth a little bit more!
Will this continue forever?
SAN FRANCISCO Google Inc.’s market value briefly surpassed $100-billion (U.S.) for the first time Friday, its stock scaling new heights after an earnings and revenue spike that astonished investors.
The on-line search leader’s shares traded as high as $346.43 on the Nasdaq Stock Market before backtracking as the day progressed. The shares had gained $36.16, or 11.9 per cent, as their price eased to $339.36 in late afternoon trading.
After the slight retreat, Google’s market value stood at $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,” Mr. 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, Mr. 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.
Mr. 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 on-line 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,” Mr. 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 $53-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,” Mr. 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,” Mr. 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, Mr. Page and Mr. Brin, both 32, each held Google stakes worth $12-billion while Mr. Schmidt’s holdings were worth $4.7-billion.