Shares of Google fell steeply than the broader market Friday after a group of Morgan Stanley analysts said the search engine company's growing investments in new products may not pay off.
"On June 27 (the day before the launch of Google+), the stock closed at $482.80. It rose to a high of $546.60 on July 7, for a $20.6 billion gain to its market cap with 322.25 million hares outstanding. Then Google shares dropped $16.22, or 2.9 percent, to $530.80 in midday trading, closing at $532 on Friday's close."
The Morgan Stanley analysts said Google was spending heavily to build and market new products, but it was not clear how and when those efforts would benefit the bottom line. In the meantime, profit margins will shrink, they said.
This month, the company launched Google+, designed to compete with social-networking giant Facebook. Google also recently began rolling out Google Offers, going after local couponing site Groupon.
The analysts say Google's products beyond Web search - including, for example, video site YouTube, the mobile apps market Android Market and the Chrome browser - might not be able to bring in as much revenue as investors hope.
Also, Google+ and Google Offers face tough competition from established rivals, Morgan Stanley said.