Google's market capitalization now bigger than Yahoo

October 26, 2004

Google's stock soared for a third day Monday, increasing the company's market value above that of Yahoo, to more than $50 billion, just two months after Google's IPO.

Google rose $14.97, or nearly 9 percent, to $187.40, boosting the Mountain View, Calif. company's market capitalization to $50.8 billion. Shares of Yahoo edged up 24 cents to $35.20, for a market cap of $47.8 billion.

Google's shares have more than doubled since they debuted in August at $85 each. Read recent IPO report as Google sets new milestones.

The stock continued to ride the momentum generated by its quarterly earnings report last week, when Google said it had more than doubled sales and earnings.

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While analysts widely applauded Google's strong sales growth for the third quarter, Janco Partners analyst Martin Pyykkonen commented that the stock is "priced to perfection."

Pyykkonen said he would be reluctant to recommend picking up the stock at current levels. He rates Google shares "market perform."

In fact, Google's rapid climb has prompted some of the company's IPO investors to sell their shares and take profits.

Connor Browne, associate portfolio manager of the Thornburg Core Growth Fund, (THCGX: news, chart, profile) said his firm sold its Google shares near the end of the third quarter when the stock was trading "near $130" a share.

"It hit our price target in a hurry," said Browne, whose fund holds $80 million in assets and whose firm, Thornburg Investment Management of Santa Fe, New Mexico, manages more than $10 billion.

At the IPO price of $85 a share, Google's forward-looking price-to-earnings ratio and other metrics the firm uses to evaluate stocks "looked cheap" compared to those of more-established Internet firms like Ebay (EBAY: news, chart, profile) and Yahoo, Browne said.

"We valued it based on what we thought it could do" over the next five years, said Browne. "We didn't think it was cheap near $130," he said.

At Bear Stearns, analyst Robert Peck said he expects the stock will settle into a less volatile range once investors tweak short-term expectations and long-term projections.

"Although fundamentals remain strong for online advertising, we are concerned about current volatility in the stock," Peck said. He maintained a "peer perform" rating on Google shares.

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Last week, the Internet search giant said it earned $52 million, or 19 cents a share, for the third quarter. In the same period a year earlier, earnings were $20.4 million. Read full details on Google's earnings report.

Google exceeded analysts' expectations for revenue and cash flow in its first quarterly report as a public company.

Quarterly sales doubled to $805.9 million from $393 million a year ago, underscoring the expanding business of search advertising on the Web. Excluding traffic-acquisition costs, Google generated sales of $504 million, topping analysts' average estimate of $456 million.

Source: CBS MarketWatch

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