Google Stock At Record High As Facebook Struggles To Meet Expectations
redOrbit Staff & Wire Reports – Your Universe Online
Shares of Google’s stock reached an all-time high on Monday, closing at $749.38 after briefly surpassing $750 during late day trading.
The previous record was set in November 2007, when Google’s stock hit $747.24 per share.
The stock had fallen below $270 per share in 2009 during the financial crisis, and remained under pressure for years as investors shifted their focus — and dollars — to new social media companies such as Facebook, Zynga and Groupon. But as those firms struggled to meet investors’ lofty expectations, Google has fallen back into favor, analysts say.
“The markets have to come to appreciate that Google’s been making money hand over fist all this time,” Pivotal Research Group analyst Brian Wieser told Reuters.
Monday’s record move in Google’s stock was due, in part, to bullish comments made over the weekend by Citigroup analyst Mark Mahaney, who raised his price target on the stock from $740 to $850 per share.
Among other things, Mahaney cited lessening competitive pressure from Facebook as part of his rationale behind the new target.
“A year ago there was heightened concern that social search — especially the integration of Bing and Facebook — could be disruptive to Google’s core search attractiveness,” he wrote in his report.
“To date, there has been no real evidence of social search disruption.”
Google, the world’s top search engine, generated $38 billion in revenue in 2011, driven by the company’s lucrative search advertising business along with its expansion into display and mobile advertising.
Meanwhile, Facebook faces less certain prospects.
“It’s so new that there’s a lack of data points for anyone to point to,” Wieser explained.
Google’s stock has surged 27 percent since mid-July, compared with a gain of just six percent on the Dow Jones Industrial Average and 9.5 percent on the Nasdaq during that time.
The stock now trades at about 17 times its expected 2012 earnings, substantially less than Facebook’s 47 price-to-earnings ratio.
Google’s record stock price follows the return last year of the company’s co-founder, Larry Page, as chief executive. Page replaced Eric Schmidt, who led the Mountain View, CA-based company for years.
Since taking the helm at Google, Page has moved aggressively to trim the company’s growing portfolio of products and services, eliminating projects such as those involving green energy and health, while boosting social networking initiatives.
But many of the challenges that pressured Google’s stock in recent years remain, such as the company’s ability to manage its $12.5 billion acquisition of Motorola Mobility. The merger is Google’s first significant move into the lower-margin hardware business, and the results of the move have yet to be seen.
Google is also bumping up against major regulatory scrutiny from governments throughout the world, including antitrust investigations in Europe and the U.S.