Shares of Google Inc. passed $500 for the first time as investors bet the company will extend its dominance in Internet search and advertising.
Google joined a group of six other companies whose shares trade above that level, including Berkshire Hathaway Inc. and Washington Post Co. Google shares have jumped 21 percent this year and rose $9.08 to $504.13 at 10:50 a.m. New York time in Nasdaq Stock Market composite trading.
The advance, spurred by surging revenue and analysts who predict further gains, marks a more than fivefold jump in Google’s stock since its 2004 public offering at $85 a share. The Mountain View, California-based company turned its focus to radio and print advertising to help extend the gains.
“This is a stock to own,” said Scott Kessler, an analyst at Standard & Poor’s in New York. “People definitely get excited about this type of milestone.” Kessler, who rates the stock “hold” and doesn’t own it, has a $500 price forecast. He spoke before the shares crossed that mark and declined to say whether he will change his target.
Google reached $400 a year ago. Standard & Poor’s said last week that the stock is set to replace HCA Inc., the biggest U.S. hospital operator, in the S&P 100.
Raising Stakes All but one of Google’s largest 10 shareholders increased their holdings of the stock in the third quarter, data complied by Bloomberg show. Fidelity Investments, the world’s biggest mutual-fund company, boosted its stake by almost a million shares to 25.5 million.
The rise gives Google, the most-used Internet search engine, a market value of more than $154 billion, placing it third behind Microsoft Corp. and Cisco Systems Inc. in market value among U.S. technology companies. Yahoo! Inc., the No. 2 in search, is worth about $37 billion.
“Google remains our top pick in the Internet space,” Heath Terry, an analyst at Credit Suisse in New York, wrote in a note last week. Along with Piper Jaffray & Co.’s Safa Rashtchy and Citigroup Inc.’s Mark Mahaney, Terry predicts the shares will top $600.
Of the analysts who follow Google, 33 recommend buying the shares, four advise holding, and one, Guzman & Co.’s Philip Remek, suggests selling.
Google now trades at 62 times what the company earned in the past 12 months, compared to Yahoo’s 55 times and Microsoft’s 22.9 times, according to Bloomberg data.
Share Sales Google went public when it sold 19.6 million shares on Aug. 18, 2004. The company sold another 14.2 million shares at $295 apiece in September last year.
The company has beaten analysts’ profit estimates in all but one of its nine quarters as a public company. A combination of marketers spending more of their ad budgets online and improvements to Google’s advertising software contributed to those results.
“The Internet ad business will ultimately be a very large component of overall advertising,” Chief Executive Officer Eric Schmidt said this month at a conference in San Francisco.
