Google ( GOOG) just got another black eye. Shares of the Internet search giant tumbled 3% Wednesday after the Mountain View, Calif.-based company disavowed advertising revenue projections it said were
accidentally released at its March 2 investors' day. This slip came after media reports indicated that Google also accidently released details of a Web-based storage service . The selloff pushed Google shares down into the $350s, a range they haven't closed at since last month, though the stock has traded at that level intraday a few times in recent weeks. The setback was the latest in a strange 2006 for the once-bulletproof company. In the last six weeks the company has missed earings estimates, spooked investors with talk of slowing growth and now retracted some numbers that were posted on its Web site the day it hosted analysts. "We find this somewhat concerning, as controls seem to be weak," writes Merrill Lynch analyst Lauren Rich Fine, who rates the shares neutral, in a note to clients. "Although this service sounds interesting, given this week's events, one might question how Google can control the privacy of its users' information if they cannot even control their own details of a planned Web-based storage product as well." Even Google bulls were a little concerned about the latest twist. "The company has made three gaffes in the past five weeks that individually and collectively do not result in a material change in our view on growth or valuation of the company," writes Goldman Sachs analyst Anthony Noto in a note to clients. Noto reiterated his outperform rating on the stock but reduced his price target to $490 from $500. He also reduced his earnings estimates for 2006 to $8.87 from $9.01, and for 2007 to $11.85 from $12.05. "That said, we are worried that the company is making mistakes on the 'little things,'" Noto adds.
Though analysts praised Google for providing more details about its operations than it has before, the company still is extremely tight-lipped. Further complicating matters are the confusing statements that come from Google senior management. Two days before the investors' meeting, Chief Financial Officer George Reyes stunned Wall Street with talk of the company's slowing growth rate. Chief Executive Officer Eric Schmidt tried to distance himself from Reyes' remarks, which Wall Street analysts said were misunderstood, when he told the crowd at the meeting that Google was setting up the infrastructure for a $100 billion company. Google is now saying that investors should ignore comments it made that said that revenue was "on a strong trajectory -- projected to grow from $6bn this year to $9.5bn next year based purely on trends in traffic and monetization growth," and that margins in its AdSense business were being squeezed. The vast majority of Google revenue comes from advertising. It's difficult to tell how many analysts saw the discredited information and incorporated it into their estimates. Wall Street expects Google's net revenue this year to be $6.56 billion, according to analysts polled by Thomson Financial. Since Google doesn't provide financial guidance, the estimates have a huge range from $5.63 billion to $7.19 billion. Those figures are so-called net revenue estimates, which subtract the money that Google shares with its advertising partners. Most Wall Street analysts consider the shares a buy and have a median price target on them of $490. They consistently underestimated Google's growth until the company missed forecasts during the fouth quarter. Google shares have yet to recover and are down 12% this year. They fell $10.51 to $353.94 early Wednesday.