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January 7, 2006
Mark Stahlman, an analyst at Caris & Co., trumped competitors on Wall
Street with his prediction Google Inc. shares will hit $2,000.
Stahlman's estimate is more than triple the closest target of $600, set earlier
this week by Safa Rashtchy at Piper Jaffray.
Goldman, Sachs & Co. analyst Anthony Noto raised his estimate
to $500 from $400 on Friday.
The analysts are trying to stay ahead of the surge in Google. The
company's market capitalization Friday rose to $137 billion, making it the
world's 28th most valuable company. If the shares reach Stahlman's forecast,
Google would be worth more than a half-trillion dollars.
"The market opportunity is large enough for them to become
that big fast, and I feel very comfortable looking at that larger opportunity
for them," Stahlman said in an interview.
Caris doesn't give near-term stock price targets, and Stahlman said
his outlook isn't a short-term target.
Stahlman said Google may one day reach $100 billion in sales as it
expands beyond search and e-mail into financial services and online health
care. The company generated $3.1 billion in sales in 2004.
The stock was sold to the public at $85 in August 2004 and more
than doubled last year, forcing analysts to keep raising their targets.
The rising price predictions echo those made during the Internet
bubble of the late 1990s when analysts competed with ever-higher targets. Henry
Blodget made a name for himself with a prediction that Amazon.com Inc. shares
would surge.
Blodget, at the time an analyst at Merrill Lynch & Co., was
barred from the securities industry for publishing biased research. His
prediction on Seattle-based Amazon in December 1998, when the shares were at
$240, proved to be correct.
Stahlman said he reached his estimate for $2,000 a share using a
multiple of enterprise value, which adds market capitalization, preferred
equity and debt and subtracts cash.
That's based on the 6.2 multiple commanded by Redmond, Wash.-based
Microsoft Corp., the world's largest software maker and the company most often
equated with Google as a competitor and model, he said.
"Most of the calculations for price targets are far too
complicated, and this seemed to be as simple as it comes," Stahlman said
in the interview.
Piper Jaffray's Rashtchy in Menlo Park, Calif., set his $600 target
Wednesday. Bear Stearns analyst Robert Peck in New York followed a day later
with a $550 prediction, and Noto released his report Friday.
The analysts cited Google's ability to win more money from
advertisers and its expansion in international markets. At least one new
product may be at risk. Skyline Software Systems Inc., of Chantilly, Va.,
claims Google's map-search service should be shut down because it infringes on
a patent.
Stahlman said his prediction was designed in part to comfort
investors concerned by Google's rapid ascent.
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