This is no time for Google’s shares to be reaching all-time highs. It’s not that the company’s performance doesn’t warrant a lofty stock price. Fresh statistics from researchers at comScore (SCOR), for instance, showed Google (GOOG) accounted for 37.1 billion, or 61%, of the 61 billion Web searches carried out globally in August.
No, the problem with Google’s stock reaching a record $625.39 on Oct. 10 is that it comes a matter of days before the company releases third-quarter results. Even gravity-defying Google can’t always surpass analysts’ forecasts as much as some investors hope.
And this time around, expectations could hardly be higher for the online advertising giant. Fueling this week’s multiple records are projections from well-known analysts such as Henry Blodget, who speculated Google could someday top $2,000 a share. “Name one company that is better positioned than Google to one day have a $1 trillion market capitalization,” wrote Blodget in an Oct. 2 post on Silicon Alley Insider, a tech business blog. He’s got a point. Despite regularly cautioning investors that growth will someday slow from its meteoric pace, Google has made a habit over the years of outperforming analyst estimates. Take results from last year’s third quarter (BusinessWeek, 10/20/06), when Google generated $50 million more than Wall Street’s lofty estimate of $1.81 billion in revenue, leading to a nearly 8% gain in the stock. With the stock steadily rising this time around, investors clearly anticipate another beat-and-raise quarter.
Source: BusinessWeek