Rapid Rise: Google Passes $400 a Share
"Google became a verb before it became a public company. Now it has also become a $400 stock.
Just 15 months after the company went public in an unusual auction at $85 a share, which was less than the company had hoped and was widely viewed as disappointing, Google traded yesterday above $400 for the first time, closing at $403.45, up $5.30. The gain helped lift the Nasdaq composite index, which rose 1.5 percent, to 2,220.46, to its highest close since June 2001.
Just five weeks ago, Google shares were trading below $300, but a surprisingly strong profit report sent bullish analysts back to their calculators to come up with even more optimistic forecasts, and investors swarmed in.
''It is more psychological than anything,'' said John Tinker, an analyst with ThinkEquity Partners in New York. ''There aren't too many $400 stocks out there.''
But Mr. Tinker noted that one explanation for the auction when the company went public was to give every individual investor a chance to get in, and not splitting the stock now may not serve that purpose. ''The perception is that it is hard for individual investors to buy $400 stocks.''
At the close, Google was valued at $119 billion, and the stock is now up 302 percent from $100.33, where it closed the first day of trading in August 2004. It is nearly double the value of its rival Yahoo, which has a value of $59.9 billion.
Google is valued higher than Coca-Cola, Cisco Systems or Amgen, and is deemed to be worth more than the combined value of McDonald's, DuPont and Anheuser-Busch. Its founders, Sergey Brin and Larry Page, and its chief executive, Eric E. Schmidt, have sold billions of dollars of their shareholdings.
Not bad for a company whose revenues over the last four quarters totaled $5.3 billion, well below Disney's revenue for any single quarter in the last seven years.
By one standard -- that of price per share -- Google is the most successful initial public offering since the Internet bubble burst in 2000.
But that reflects both the fact that it came out at a very high price, while most new offers are priced under $40, and the fact that Google, like Warren E. Buffett's Berkshire Hathaway, eschews stock splits. Google is in no danger of replacing Berkshire as the highest-priced stock in the United States. Berkshire closed yesterday at $89,700.
High prices were a feature of the Internet bubble, but many did not end well. Henry Blodget, then an analyst with CIBC Oppenheimer, gained fame in late 1998 for forecasting that Amazon.com, then trading around $240, would hit $400.
It never did, but that was because a stock split intervened. Adjusted for the split, the stock took just three weeks to get to the equivalent of $400, and it kept rising from there. The shares peaked in late 1999 at $113, or the equivalent of $678 when Mr. Blodget made his forecast. They later fell to under $10, but now are back to about $46, a little above the level when Mr. Blodget spoke up.
A company called Commerce One, which was supposed to be a pioneer in business-to-business Internet, was one of the hottest new offerings of 1999, nearly tripling on the first day of trading, closing at $61 on July 1. It went above $400 on Dec. 8 and peaked on Dec. 23 at $625.50, a gain of more than 900 percent from the first-day close.
Last month the company went into liquidation, with shareholders getting a few pennies per share.
When Google put out its earnings on Oct. 21, the stock leaped $36.70, to $339.90, and analysts from Piper Jaffray, UBS, RBC Capital Markets and First Albany raised their price targets to more than $400, and other analysts raised the targets to $400.
Of all the offerings since the end of 2000, Google ranks No. 10 in terms of appreciation from the first-day close, according to calculations by Thomson Financial.
The leader is the Chicago Mercantile Exchange, which almost made it to $400 before Google did. Last week it traded as high as $394.80, but it slipped back and closed at $378.25 yesterday, up 782 percent from its first-day close of $42.90 in 2002.
MARKET PLACE"