Analyst’s Google Forecast Evokes Bubble Memories

Look out, $200. Here comes Google.

Shares of Google Inc. soared more than 15% to close at $172.43 in Nasdaq trading Friday, one day after the Internet search titan’s third-quarter earnings report revealed it to be profiting handsomely from online advertising.

Those results led one Wall Street analyst to predict before Friday’s opening bell that shares of the Mountain View, Calif., company were on their way to the $200 mark. And that evoked comparisons to the dot-com frenzy of the 1990s.

“An investment in Google is, in effect, an ownership stake in a company with maximum exposure to the online advertising market’s fastest-growing format,” Prudential Equity Group analyst Mark Rowen wrote to clients as he raised his price target to $200 from $130, a level Google passed 2 1/2 weeks ago.

Some market observers said Rowen’s $200 call on Google reminded them of Internet analyst Henry Blodget’s prediction in December 1998 that bookseller Amazon.com Inc. would hit $400 within a year.

With Amazon at about $240 at the time, the forecast seemed outrageous. But it drove the stock up $46 in a day, and the shares eventually soared above $600, when taking stock splits into account.

But there’s one big difference between Amazon then and Google now: profits. Although Amazon was losing millions of dollars at a similar point in its development, Google cleared $52 million in its first quarter as a public company. Excluding a $201-million legal settlement with rival Yahoo Inc. and certain other items, its profit was $193 million, or 70 cents a share, about 25% higher than Wall Street had been expecting.

While impressed, Janco Partners analyst Martin Pyykkonen said Google’s performance wasn’t enough to justify a $200 stock valuation considering that it relied almost entirely on revenue from online advertising.

“I’d be cautious about buying at these levels,” said Pyykkonen, who worked with Blodget at CIBC Oppenheimer.

Blodget’s Amazon call made him famous but Internet stocks -- and his career -- eventually came crashing back to earth.

“Those of us who’ve been in the business for a while looked at the wild targets that people were putting out there, and our jaws dropped,” Lise Buyer, a former Internet analyst for Credit Suisse First Boston, told CBS News in January 2001. “And then we watched the stocks follow suit.”

Buyer isn’t an analyst anymore. She is now the Wall Street liaison for ... Google.