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Google Catches Cold

The Net pacesetter is below $400 for the first time in two months.

Updated from 3:20 p.m.


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took a shellacking Friday, sliding more than 8% as investors fled stocks after a tough week on the earnings front.

The selloff sent shares of the Mountain View, Calif., search engine down into territory not seen since before Thanksgiving. Google dropped $36.98 to $399.46.

Google's meteoric rise has prompted debate among investors over whether its share price is justified or not. Until Friday, bulls had mostly carried the day: Google shares hit $400 Nov. 17 and kept going, with a January surge taking them as high as $475 at one point. At its all-time high, Google was up 459% on its August 2004 initial public offering price of $85.

Caris & Co. analyst Mark Stahlman raised a few eyebrows earlier this month when he suggested that Google could theoretically reach $2,000, though he stressed that wasn't a target, for what that's worth. Piper Jaffray analyst Safa Rashtchy has a $600 target on the stock, the highest of any analyst.

"Our view is that there is a long way to go down," says Rick Summer, an analyst with Morningstar, which has no official recommendation on Google's shares but pegs their fair value at $254. "Whether that's Monday, next month or over the next few quarters isn't known."

Friday's drop came as investors fled the market in general and tech in particular. This week tech leaders





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all reported disappointing results or offered wan outlooks.

On Friday the weakness spread to the so-called old economy with profit setbacks at


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. A 213-point decline in the

Dow Jones Industrial Average

left the closely watched blue-chip barometer in the red for the year.

Figuring out whether Google should be lumped in with the rest of the tech sector is difficult even for the company's admirers, since the company doesn't provide earnings guidance. Google continues to rule the search market, receiving more queries than all of its major competitors combined. There also is little doubt that search continues to soar in popularity.

"Google has had such a great run, you have to expect some type of pullback," says Alan Lowenstein, portfolio manager with American Fund Advisors, who follows the tech sector. "As the stock drops, it will have analysts come out and defend it."

In addition, media reports about Google's decision to fight a federal subpoena for search queries as a part of an investigation into child pornography is probably not helping the stock either, says Lowenstein, who declined to say whether his fund owns shares of Google.

Earlier this week, analysts Scott Devitt of Stifel Nicolaus and Scott Kessler of Standard & Poor's cut the search engine giant to sell, bucking the overwhelming sentiment of Wall Street analysts who consider the stock a buy.

Google is due to post earnings Jan. 31. Analysts are forecasting earnings per share of $1.76 on sales of $1.29 billion, according to Thomson Financial.

To view Jonathan Berr's video take on Google, click here