Two Abandon Google Bandwagon

S&P's Kessler, who also has no position in Google, is more optimistic. In a report Tuesday, he raised his 2005 and 2006 per-share earnings forecast for Google to $5.84 and $7.91 from $5.80 and $7.62. Still, he has similar concerns about Google's valuation.

"Our 12-month target price remains $428, based on our discounted cash flow and peer analyses," he writes. "We think Google still faces notable risks, including a lack of revenue diversification, mounting competition and click fraud."

In his note, Devitt notes that other analysts following Google don't see things the way he does. There have been seven positive sell side analyst revisions in the past month. Caris & Co. analyst Mark Stahlman recently argued that Google could theoretically reach $2,000. Piper Jaffray analyst Safa Rashtchy has the highest official target price, at $600.

Google is due set to report earnings on Jan. 31. Analysts are forecasting earnings per share of $1.76 on sales of $1.28 billion, according to Thomson Financial.

Early Wednesday, Google slipped $12.51 to $454.50 and Yahoo! plunged $4.66 to $35.45.