Google Bandwagon Creaks On

The Google (GOOG) pain subsided a bit Wednesday, as fans of the search engine predictably rallied to its cause.

Shares in the Internet's latest, greatest highflier dropped 9% the morning after an earnings shocker. While Wall Street had expected the company to make $1.76 a share, Google made just $1.54, saying taxes were killing it.

But steep as it was, Wednesday's selloff seemed positively orderly next to the vibrant selling that accompanied Tuesday evening's report. Stunned investors sent the stock plummeting 17% in postclose action, surrendering gains dating back all the way to Halloween, before Google trimmed its losses late in the after-market session.

On Wednesday, analysts -- who have grown increasingly shrill in their support of the stock's eye-popping run-up -- were quick to point out that the company's underlying results are still quite strong, though some felt moved to trim their gaudy price targets to slightly less absurd levels.

After opening just shy of $390, Google crawled ahead to $393 at late morning Wednesday, down $39 from Tuesday's close. Volume hit 15 million shares at 11:20 a.m. EST, already comfortably ahead of the stock's average daily volume of 11 million shares.

"In short, we believe the market is overreacting," wrote JMP Securities analyst William Morrison, who reiterated his strong buy rating on the stock, in a note to clients Wednesday. "We continue to believe Google is gaining significant market share of global search queries, and the global search opportunity is no smaller than it was yesterday." Still, Morrison cut his price target to $550 from $575, based on 50 times 2007 estimated free cash flow per share and 25 times 2007 earnings before interest, taxes, depreciation and amortization.

To be sure, Google's results were nothing to scoff at. Net income jumped 82% from a year ago to $372 million, or $1.22 per share. Gross revenue jumped 86% to $1.92 billion. Excluding so-called traffic acquisition costs, net sales were $1.29 billion.