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Google Stock Price Rises Above $500 | ASHARQ AL-AWSAT English Archive 2005 -2017
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SAN FRANCISCO, (AP) -Google Inc.’s stock price surpassed $500 for the first time Tuesday, marking another milestone in a rapid rise that has catapulted the Internet search leader into the corporate elite.

Continuing a recent surge driven by Wall Street’s high expectations for the company, Google’s shares rose $14.60, or nearly 3 percent, to close at $509.65 on the Nasdaq Stock Market.

That left Google with a market value of about $156 billion just eight years after former Stanford University graduate students Larry Page and Sergey Brin started the business in a Silicon Valley garage.

The Mountain View-based company now ranks as Silicon Valley’s second most valuable business, eclipsing the likes of Intel Corp., the world’s largest computer chip maker, and Hewlett-Packard Co., a high-tech pioneer that also famously started in a garage 67 years ago. With a market value of about $163 billion, networking equipment maker Cisco Systems Inc. is the only Silicon Valley firm worth more.

Google’s remarkable success has minted Page and Brin, both 33, as multibillionaires along with their hand-picked chief executive, Eric Schmidt.

Hundreds of other Google employees are millionaires because so many investors want to own a piece of a company that has become the Internet’s most powerful financial force while building a brand so ingrained in society that it has become part of the English language.

It took slightly more than a year for Google’s shares to travel from $400 to $500 — the stock’s longest journey from one major milestone to the next since the company priced its initial public offering at $85 in August 2004.

The shares topped $100 on their first day of trading on the Nasdaq Stock Market, then crossed $200 in less than three months. The stock broke through $300 another seven months later in June 2005 and then breached $400 on Nov. 17 last year.

The latest spurt of optimism appeared to reflect a belief that Google will quickly introduce ways to mine more online advertising revenue from its just-completed $1.65 billion acquisition of YouTube Inc. Google used its stock to finance the deal.

“Arguably, Google is positioning itself yet again to play in an emerging market that is going to be very significant,” said David Garrity, director of research for Dinosaur Securities.

Like other Internet stocks, Google is also getting a seasonal lift in anticipation of more holiday shopping being done online. With a 45 percent share of the Internet search market in the United States, Google is expected to direct much of the shopping traffic — a role likely to generate more referral fees for the company.

Google so far has made most of its money selling brief, written ads that are posted alongside search results and other online content, but management believes it can amass even bigger profits by expanding into video and delivering more messages to mobile computing devices.

Management also wants to extend Google’s advertising clout beyond the Web. The company is currently testing a program to place ads in 50 of the nation’s largest newspapers and hopes to begin distributing radio ads by the end of this year.

“They have the opportunity to become a quasi-advertising agency,” said Global Crown Capital analyst Martin Pyykkonen.

Those grand ambitions are one of the reasons that Google shares keep climbing. The run-up makes Google’s stock look fairly expensive by one widely used barometer known as the price-to-earnings, or p/e, multiple.

Analysts, on average, predict Google will earn $13.70 per share next year, leaving the company’s p/e at about 37. By comparison, the p/e of Microsoft Corp. — the world’s most prized technology company with a market value of nearly $300 billion — is about 21, based on analyst’s 2007 earnings projections.

Most analysts still believe Google is reasonably priced because of the breakneck growth that is expected to propel the company’s profit well beyond $2 billion this year, up from a mere $106 million in 2003.

“It’s not really trading at obscene levels,” said Pyykkonen, who expects Google shares to hit $550 soon. Other analysts believe Google will hit $600 within the next year.

Betting against Google has proven to be foolish so far. In the months leading to Google’s IPO, widespread skepticism about the company’s growth prospects prompted management to discount its desired price, enriching investors who were able to buy at $85. And just eight months ago, Google shares dropped as low as $331.55 amid fears that the company’s earnings growth might be on the verge of a dramatic slowdown.

Anyone waiting for a stock split before investing in Google risks being left on the sidelines. Although most publicly held companies regularly split their stock to create a lower per-share price that appeals to more Main Street investors, the proudly unconventional Page and Brin have repeatedly indicated they have no intention of resorting to that maneuver.