Analyst: Google to hit $630 a share in 07
Crazy times. Again.
A year after people wondered whether Wall St had taken leave of its senses by over-valuing Google, the analysts are back with more fantastic predictions.
Piper Jaffray's Safa Rashtchy has again pumped up his target price for Google stock, to $630 from $600 for 2007, while projecting earnings coming in at $16.59 a share.
Rashtchy is placing his faith in Google's ability to continue growing its online advertising revenue using the cross-pollination created by the Google's non-search related products such as maps and blogging tools.
According to Piper's analyst, non-search products create a "virtuous cycle of brand affinity" that increase use of the site and its core search engine.
What does Rashtchy base his predictions on? An "in-house survey of internet users."
While Google's shares are likely to continue moving upwards during 2007, and those who baulked at the $85 asking price when Google listed back in 2004 will continue to kick themselves for not buying then, it's worth taking a little time out.
First, it was in January 2006 when Rashtchy last raised his guidance from $445 to $600. According to no less an authority than Google's own financial charting site, the giant came in a little shy of the "high end", hitting a 52-week high of $513.
Missing Wall St expectations by as little as a penny usually prompts furrowed brows and searching questions. Google missed this analyst's prediction by $87.
At the time, Rashtchy said he "expected" new initiatives from Google would generate "meaningful revenue" by the end of 2006. Very shortly afterwards, later in January to be precise, Google launched its Video Marketplace, pushing shares up to $466.
As 2007 dawns and Google tears away from its second largest competitor, Yahoo!, in spectacular fashion, there's a new element Wall St analysts must factor into their predictions, which was lacking in 2006: Microsoft.
While Microsoft's online ads revenues are currently going "sideways" and its search service struggles to gain market share, it will surely be only a matter of time before the gravitational power of the Microsoft brand takes effect and begins to siphon business away from Google.
Next, if recent history has taught us anything about research from financial analysts, it's that the research should be handled very carefully. Jeffries & Co analyst Katherine Egbert's "independent checks" convinced her Oracle was close to launching its own Linux. What we got, instead, was Oracle's Red Hat support network.
Finally, experience tells us a Wall St office or brokerage floor is not at all representative of the IT market in general.®