Google Shares: Do I Hear $360?

Updated from 8:00 p.m. EDT

The Google bids just keep on rising.

Not, that is, the bids that advertisers make to place ads on Google's site or in its extensive network of sites. But the bids that research analysts covering Google keep making in the form of price targets, which have been spurring speculative traders starving for any information on the closely watched stock.

The latest bid came from Smith Barney, which initiated coverage late Tuesday on Google at $360, nearly 30% above the stock's closing price on Wednesday. Google fell 4.6% to $279.56 in Wednesday's trading session, partly amid concerns that data on keyword prices declined in May from April. In after-hours trading it was up 0.5% to $280.88.

Fathom Online said Tuesday that average prices paid for keywords it tracks fell 15% to $1.66, thanks largely to a 30% drop in mortgage-related keywords. But Fathom's release also stressed that the data are intended for advertisers, and shouldn't be extrapolated into financial assumptions about search companies.

It's well known that advertisers are spending more money on search, but most of that new spending is going on a growing population of ever-creative keywords and not the traditional keywords that are easiest for Fathom and others to track.

Smith Barney, which has provided investment banking services for Google in the past year, ended coverage of Google back in March, but is re-initiating it just in time to place the highest bid in the latest round of pin the price on the stock.

"We acknowledge that the price target is intrinsically very high -- as is the implied $100Bish market cap," wrote Smith Barney analyst Mark Mahaney. "But this valuation is derived from our published estimates and from what we believe are reasonable multiples given our estimated bottom-line growth projections for Google. We apply a 31X multiple to our 2006 EBITDA estimate of $3.3 billion ($10.80 per share) to reach a $351 target price, adjusting for $3.5 billion ($11.76 per share) in cash."