This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Google Fans Still Gushing

Google (GOOG) got another pat on the back Thursday as the big search engine closes out another spectacular market year for its shares.

JMP Securities raised its 12-month price target on the stock to $575 from $400. Google shares, which have doubled this year and are up fourfold from their August 2004 initial public offering price, rose 76 cents to $427.09.

Analyst William Morrison now appears to have the highest forecast of Google's share price of any analyst covering the company. The most bullish price targets for Google until now have been $500. Six analysts have raised their price targets on the shares since it hit $400 on Nov. 17.

Morrison's target comes a day after Google agreed to invest $1 billion for a 5% stake in Time Warner's (TWX) America Online Internet unit. For its part, AOL will get $300 million in advertising credits from Mountain View, Calif.-based Google. The deal has been denounced by billionaire investor Carl Icahn, who is waging a proxy fight with the media giant.

Morrison based his price target on 2007 forecasts of earnings before interest, taxes, depreciation and amortization and free cash flow. He values Google at 50 times his $11.50 free cash flow per share estimate and 25 times his $6.6 billion EBITDA projection. Previously, Morrison based his target assuming 27.5 times his $4.3 billion 2006 EBITDA and 50 times his $7.85 free cash flow per share forecasts.

"We encourage investors to discount our price target by some reasonable hurdle rate or the cost of capital for the company in determining the near-term investment opportunity," Morrison, who rates the shares outperform, says.

The AOL deal presents a big opportunity for Google, Morrison says. Assuming what he considers to be a "conservative" EBITDA margin of 50% and no growth in 2006, AOL will likely generate about $45 million in cash flow for Google next year. The AOL relationship would account for about $1.2 billion of Google's enterprise value, on the basis of Google's current multiple.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs