Google Inc.’s stock reached a new high Friday, reflecting Wall Street’s renewed faith in the Internet search leader as it introduces new ways for advertisers to reach its steadily expanding online audience.
The shares climbed to $560.55 in midday trading, eclipsing the previous peak of $558.58 attained in mid-July, just days before the Mountain View-based company disillusioned investors with a second-quarter profit that fell below analyst estimates.
Google shares settled back to $560.29, up $7.51. That left the 9-year-old company with a market value of almost $175 billion, more than long-established technology bellwethers like Hewlett-Packard Co. and IBM Corp.
The latest run-up in Google’s stock represents a turnaround from a little over a month ago when the shares briefly dipped below $500 amid the stock market turmoil triggered by a home mortgage meltdown that raised fears about a recession.
The formidable lead enabled Google to earn $1.9 billion on $7.5 billion in revenue during the first half of the year. The company usually makes even more money during the second half because of the advertising blitz that accompanies the holiday shopping season.
Google already is trying to boost its profits by rolling out other marketing options besides staid advertising links.
Last month, Google began showing video ads on its subsidiary, YouTube, the Web’s most popular video channel. Earlier this week, Google dramatically increased the number of ads distributed to mobile phones and unveiled a system for displaying ads on “widgets” – mini-applications that are embedded on Web pages.
Investors are betting Google’s dominance, coupled with its expansion efforts, will yield the robust earnings growth needed to support its rich valuation. Google’s price-to-earnings multiple – a widely used yardstick for appraising publicly held companies – now stands at 37 times its estimated earnings for this year. By comparison, Microsoft’s price-to-earnings multiple is hovering around 17.
Several industry analysts already are forecasting Google shares will soon surpass $600. The stock eclipsed $500 for the first time 10 months ago.
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Source:? Seattle Post-Intelligencer