SAN FRANCISCO –Google’s stock price topped US$800 for the first time Tuesday amid renewed confidence in the company’s ability to reap higher profits from its dominance of Internet search and prominence in the growing mobile market.
The milestone comes more than five years after Google’s shares initially hit US$700. Not long after breaking that barrier in October 2007, the economy collapsed into the worst recession since World War II and Google’s stock tumbled into a prolonged malaise that eventually led to a change in leadership.
Besides enriching Google’s employees and other shareholders, the company’s resurgent stock is an implicit endorsement of co-founder Larry Page. He replaced his managerial mentor, Eric Schmidt, as CEO in April 2011. Google’s stock has risen by 36 percent since Page took over. By contrast, the benchmark Standard & Poor’s 500 index has climbed by 15 percent over the same stretch.
Reinvesting in Android Most of Google’s gains have occurred in the past seven months — a period that has overlapped with a sharp downturn in the stock price of rival Apple Inc. The iPhone maker’s market value has plunged by about US$230 billion, or 35 percent, since late September.
“All that Apple money had to go somewhere,” said BGC Financial analyst Colin Gillis.
Standard & Poor’s Capital IQ analyst Scott Kessler concurred, reasoning that many investors who have abandoned Apple are gravitating to one of its biggest rivals.
Google makes and distributes its free Android software to Samsung Electronics Co., HTC Corp. and other mobile device makers looking to compete with Apple’s iPhone and iPad. Since its 2008 introduction, Android has established itself as the most popular mobile operating system, partly because the free software makes it easier for device makers to undercut Apple’s prices for iPhones and iPads.
Android is set up to feature Google’s search engine and other services, giving the company a chance to sell more ads.
“If you are looking at Apple’s peers in its space and see who seems to be really doing well right now, it makes a lot of sense to invest in Google now,” Kessler said.
Despite its diminished luster, Apple remains the most valuable U.S. company with a market value of US$432 billion. Google now ranks third with a market value of US$266 billion, with Exxon Mobil Corp. holding the spot in between at US$402 billion.
Google’s stock climbed US$13.96, or 1.8 percent, to close Tuesday at US$806.85.
Analysts who follow Google still see room for some modest gains. The stock’s average price target among analysts surveyed by FactSet now stands at US$834.40. Five of the 37 polled analysts are predicting Google’s stock will surpass US$900 within the next year.
“There are probably even going to be people talking whether Google’s stock can get to US$1,000,” Kessler said. “Never underestimate the excitement that can be caused by a rising stock market and a rising security.”