Google's ( GOOG) underwriters started coverage of the search-engine company's stock Tuesday, setting price targets as high as $145.That 12-month goal for the stock, from Credit Suisse First Boston's Heath Terry, represents a 20% increase from Google's price Tuesday morning and a 71% gain from Google's initial public offering price of $85 a share. CSFB's report was one of at least five positive reports issued Tuesday by Google's underwriters following the 40-day post-IPO blackout on research from a company's underwriters. Contrasting with mixed reviews for Google already published by analysts from firms that didn't participate in Google's IPO, CSFB's report, along with initiations from fellow joint book-running manager Morgan Stanley and underwriters Thomas Weisel Partners, WR Hambrecht and J.P. Morgan, all assigned Google ratings equivalent to a buy. On Tuesday morning, Google's shares climbed $2.39 to $120.65. While acknowledging the challenges in valuing Google and forecasting its future, the analysts publishing Tuesday generally argued that Google is a strong play on the growth in the relatively young Internet search advertising market. Terry, initiating with an outperform rating, forecasts that over the next five years, Google will be able to show annual revenue growth of 50% and annual earnings growth over 30%. "In our own valuation analysis," writes Terry, "we have arrived at prices ranging from $82 all the way
WR Hambrecht's William J. Lennan Jr. initiates with a buy rating and a $140 target price. Calling Google a "pure play on the fastest-growing form of online advertising," Lennan writes, "We think Google is in the early days of an enormous opportunity, as online advertising still represents less than 3% of the global advertising market." J.P. Morgan rates Google overweight and Thomas Weisel rates it outperform, but neither firm assigns a price target to the stock. Acknowledging Google's tendency to invest in projects that are appealing to consumers but aren't "overtly advertiser friendly," Weisel's Christa Sober Charles writes, "We believe the likelihood that Google invests in negative
return on investment projects is high, but that the option value for a potential stepfunction technological improvement over its competitors is also high. Ultimately, gaining a larger share of online advertising is a ratings game, and if Google can drive consumer traffic to its site, effectively improving its ratings, its share of online advertising should continue to increase."