Less than a week before
is set to report fourth-quarter earnings, speculation on Wall Street about how the most popular search engine will perform is reaching a fever pitch.
The Mountain View, Calif.-based company has stirred debate ever since its 2004 initial public offering. While critics cried that the company was deeply overvalued at its $85 IPO price, fans engaged in a never-ending round of price-target raising that culminated in one respected analyst
putting $600 in his bull's-eye.
The excitement pushed the stock into the high $400s earlier this month, 459% above the IPO price, before a mild pullback brought the stock down to its recent $435.
In any case, Google now finds its market valuation around $130 billion, surpassing tech mainstays
, among countless others.
So who's got anything left to say about Google? Well, veteran price-target setter Henry Blodget, for one.
"Google's recent gyrations have illustrated that the stock is now firmly in the thrall of fear and greed," writes the disgraced former Wall Street analyst turned blogger, on his site InternetOutsider.com. "Any hint that Google will no longer blow away Street estimates, therefore, and the stock will tank."
Add confusion to the mix too. Analysts have a poor track record in predicting the earnings of the Mountain View, Calif.-based company. Google has beaten earnings estimates in three out of the past four quarters. The company catapulted past earnings estimates during the third quarter, which had been expected to show signs that things were slowing down.
Fourth-quarter earnings estimates for Google are wide enough to drive a truck through. Wall Street analysts are predicting that earnings per share could be as low as $1.51 and as high as $1.98, according to Thomson Financial. Sales projections range between $1.18 billion and $1.37 billion.
Ever since Yahoo! reported disappointing earnings earlier this month, questions have arisen about whether Google would have difficulty meeting already lofty investor expectations. These concerns are baseless, according to bullish analysts such as Merrill Lynch's Lauren Rich Fine, who rates the shares neutral.
"Google continues to gain share of search traffic and we do not doubt their ability to monetize it," she writes in a recent note to clients. "Yahoo! on the other hand is losing share of search traffic, but should continue to benefit from the growth of branded advertising and also see some higher growth in its fee revenues from increased portability of its content."
Fine is among the minority of Wall Street analysts who doesn't rate the shares buy. Analysts have an average target price for the shares of $517.06, according to data from
Google is now showing signs of being mortal. Its recent video store offering has been panned by critics including
The New York Times
. Google Vice President Marissa Mayer told
that the design of the service was a "mistake."
Investors also are still wondering whether the company can keep up its torrid growth rate, which has seen net income rise from $63.97 million in the first quarter of 2004 to $318.18 million in the third quarter of 2005.
"As the stock has had an amazing beginning of the year run, there are some very near-term risks that Q4 results will disappoint relatively to raised expectations, and that after a flurry of announcements, the economic follow through won't be evident enough near term, the stock could take a breather," Fine writes.
For his part, Blodget is trying to have a little fun with the Google hype. He is running a contest to see who can come closest to guessing Google's fourth-quarter revenue and how the shares will react the next day.
But not too much fun. Blodget, who is banned from the securities industry after he was caught disparaging stocks in private that he lauded in public, isn't offering a prize to the winner.