By Ron Day, Bloomberg
London: Google Inc., owner of the most-used Internet search engine, had its stock rating lifted to “buy” by UBS AG, which cited the growth of the company’s search business and a recent price decline.
UBS’s Benjamin Schachter raised his rating from “neutral” and reiterated his $560 share-price forecast in a note to clients today. Schachter, based in New York, was a runner-up in Institutional Investor magazine’s rankings of top Internet analysts last year.
Schachter recommended buying shares of Mountain View, California-based Google to take advantage of an 8.8 % drop in the stock price since the company reported fourth-quarter sales that disappointed investors. Revenue from advertisements attached to search results is growing and investments in new technology won’t trim earnings much, he wrote.
“Google’s core search business, driven by keyword advertising, justifies a target above $500,” Schachter wrote. The higher rating on the stock “is based almost solely on Google’s continued success with keyword advertising.”
Shares of Google, which began trading at $85 a share in August 2004, fell $1.91 to $455.64 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock reached $400 in 2005 passed $500 for the first time in November 2006 as analysts predicted the shares may gain another 20 %.
Of analysts tracked by Bloomberg, 32 recommend investors buy the shares, three advise holding the stock, and one says sell. Google trades at 33 times estimated 2007 earnings, compared with 52 times for Yahoo Inc., second-biggest Web search provider.
The stock rose 11 % last year. Google Chief Executive Officer Eric Schmidt is looking beyond the small text links that appear next to search results for the next wave of growth. Google bought YouTube Inc. last year to tap the video-ad market, and has tested ad sales in 50 newspapers and on radio.
In the fourth quarter, six of Google’s 10 biggest investors increased their stakes, according to data compiled by Bloomberg.