Google Fans Target Keyword 'Upside'

But will its earnings be more like Yahoo!'s or eBay's?
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Updated from 8:03 a.m. EST

Wall Street thinks

Google

(GOOG) - Get Report

will do as well as or better than

Yahoo!

(YHOO)

.

But don't rule out the risk it will pull an

eBay

(EBAY) - Get Report

.

With the Internet search engine phenomenon preparing to release fourth-quarter results after the market closes Tuesday, there's confidence among sell-side analysts that Google will surpass consensus estimates, as Yahoo! did last month.

That scenario faces one obvious threat. Given Google's brief history as a public company and its founders' aloofness, it is possible the company's quarter will reflect higher-than-expected investments in ventures that don't result in immediate cash.

And given the volatility of Google's stock, its phenomenal rise since its $85-a-share initial public offering last August and the confidence that analysts have in the growth of both Google and the Internet advertising market, it's plausible that Google's shares could take a tumble should the company make the slightest stumble. Recall eBay, whose shares dropped 19% the day after its

earnings came in a penny below expectations.

But in the event this worst-case scenario comes to pass, at least Google will have an extended opportunity to plead its case later this month. The less-than-forthcoming company -- whose passion for secrecy evidently led its chief counsel afoul of the

Securities and Exchange Commission

-- is slated to get all chatty when it makes a daylong presentation to analysts Feb. 9.

Another bright spot for Google fans is the diminishing worry about negative repercussions from the final post-IPO lockup expiration on shares held by company insiders. Both the history of orderly trading following previous lockup expirations and limits on the forthcoming Feb. 14 expiration appear to have persuaded analysts that the theoretical increase in the company's float won't sink the stock.

Google shares, which peaked at $205.30 Jan. 19, then dropped to $176.29 last week, rose $5.28 to trade at $195.62 Monday. They're down 14 cents $195.48 Tuesday morning.

For the record, analysts surveyed by Thomson First Call expect Google to report earnings per share for the fourth quarter ended Dec. 31 of 77 cents. That's up from the 70-cents headline number distilled from Google's third-quarter results, its first as a publicly traded company.

The First Call number excludes stock-based compensation, and the third-quarter number excluded as well the negative impact of settling litigation with rival Yahoo!.

On the top line, analysts expect net revenue of $591 million, up 17% from $503 million in the third quarter. As with the top-line number most commonly reported out of Yahoo!, that revenue figure excludes traffic acquisition costs, or the money that Google pays to other publishers for the privilege of running on their sites the advertisements it sells.

The mean of analysts' estimates for earnings before interest, taxes, depreciation and amortization amounts to $368 million, up from $321 million in the third quarter.

To sum up the mood among analysts, the confidence in Google's ability to show strong sequential growth is offset by fears of possible surprises the company may have in store regarding greater-than-expected investments in ventures such as

Google Video.

American Technology Research's Mark Mahaney, for one, estimates that Yahoo!'s search revenue grew at an organic rate of 18% to 19% from the third to fourth quarters. With Google's larger international footprint, Mahaney estimates Google's search revenue will grow 20% or more. (Mahaney has a buy rating and a $210 price target on the stock.)

Particularly optimistic is RBC Capital Markets' Jordan Rohan, who expects Google's prior investments in international operations to pay off in the form of expanding EBITDA margins, not the contraction most expect. This growth could have taken place in the fourth quarter, writes Rohan, though it is equally possible it will happen in the first. (Rohan has a top pick rating on Google, and a Street-high price target of $235.)

But Benjamin Schachter of UBS warns investors to expect the unexpected. In a note published last week, he wrote that it wouldn't be surprising for Google to discuss new, significant investments in long-term businesses that could affect near-term numbers.

"In light of the market's reaction to eBay's miss and increased long-term investments," wrote Schachter, "we are admittedly gun-shy about how the Street would react to similar long-term investments from Google." (Schachter has a "reduce" rating and a $160 price target; his firm has done recent investment banking for Google.)