Posted on: Tuesday, September 28, 2004
Google shares up 41% since Aug. 19
By Chris Gaither
Los Angeles Times
SAN FRANCISCO — The stock that struggled to get off the ground just five weeks ago now won't come back to earth.
Google Inc.'s shares have soared 41 percent since Aug. 19, when the Internet search titan held its hotly anticipated — and fiercely debated — initial public offering.
The price hit a record $124.10 in Nasdaq trading Friday before tumbling yesterday to close at $118.26 a share. It was only the third losing session in three weeks.
The stock's rapid climb is reminiscent of some of Silicon Valley's rocket-ship rides in the 1990s, but there's some disagreement over how thin the air is at Google's current height.
"I wouldn't buy it or recommend it to anyone here," said Andrew Schroepfer, president of Tier1 Research, who added that he wouldn't pay a dime over $110 for Google shares.
But Quoc Do, the sort of small investor Google targeted in the IPO, said he had no plans to sell his nine shares.
"I expect it to be bumpy as more insiders start selling their shares, but in the long run I think it's going to do well," said Do, a software programmer from Los Angeles.
Investors such as Do who participated in Google's unorthodox auction have watched the value of their shares rise from the IPO price of $85. Even the holdings of people who bought at $100.34, the first trading day's closing price, have increased 19 percent.
Google now boasts a market capitalization of $32.5 billion. That's more than Honeywell International Inc. and just shy of McDonald's Corp. It's also a few billion dollars less than dot-com flameout Excite@Home was worth at its peak.
This from a stock most of Wall Street gleefully bashed in the weeks before the IPO.
So what gives?
The Mountain View, Calif.-based search provider hasn't made any major announcements. It hasn't done away with the practices that spooked many investors, including a two-tiered ownership structure and management's refusal to issue financial guidance.
Instead, Google seems to be riding a wave of good tidings toward Internet stocks in general. With the uncertainty of its unusual IPO in the past, there's a growing feeling that Google shares, which trade under the ticker symbol GOOG, will become a blue-chip holding for tech investors.
"Right now the people that own the stock see it as very much a core holding, akin to a Yahoo or an eBay," said Youssef Squali, a Jefferies & Co. analyst.
Internet stocks were just coming out of a seven-week funk when Google went public. Yahoo Inc., eBay Inc., Amazon.com Inc. and others had reported decent second-quarter profits, but their third-quarter and full-year forecasts disappointed investors.
Since then, other Internet stocks have climbed as steadily — although not as rapidly — as Google. Yahoo has gained 16 percent since Aug. 19. EBay has risen 12 percent. Amazon is up 6 percent. And search-engine provider Ask Jeeves Inc. has soared 27 percent.
The rise has been fueled by the hot Internet advertising market, analysts say. Online ads generated a record $2.37 billion in revenue during the second quarter, a 43 percent rise over the same period last year, according to a report released last week by the Interactive Advertising Bureau and Pricewaterhouse-Coopers. The previous peak was during the dot-com boom.
