Android pushes Google stock to $600
Success in new markets like display ads and mobile helped the tech giant post blowout third-quarter earnings, pleasing both analysts and investors.
By Scott Moritz, TheStreet
Analysts responded by showering Google with praise Friday.
"Firing On All Cylinders," read the title of ThinkEquity's research note. "No Longer a Single-Trick Pony," said the headline on Caris & Co's report, which raised Google's price target to $700 Friday.
For Google watchers, the moment marks a huge turning point as the company that once relied on search ads for 97% of its revenue now finds significant growth outside the core business that fueled its initial success.
Google's acquisitions of outfits like DoubleClick and AdMob helped turn display ads into a $2.5 billion annual business. And Android -- the bold gamble to create free operating systems for mobile phones -- has now put Google on track to pull in $1 billion a year in mobile ad sales.
"The gambit has long been whether these other areas were just loss-leaders to surround and protect the main business, or serious vertical businesses in their own right," Mark Sigal wrote in his blog the Network Garden.
Further evidence showing that perhaps it really does take money to make money is Google's spending heavily for years on pet projects like Google Earth maps, robotic cars, Street View panoramas and book scanning -- without any obvious sign or concern about payback.
Google pulled in some of that spending as the recession kicked in and jobless rates soared. And Google has been on the defensive lately as its expansion plans start to look excessive. Suddenly frugal, Google has moved to shut down unprofitable ventures like 1-800-GOOG-411 and its Google Groups topic forums.
"We are investing," CFO Pat Pichette told analysts on the earnings conference call Thursday, adding that people shouldn't see Google's aggressive pursuit of fantastic opportunities as waste. "We are just not a wasteful company," Pichette said.
Google's progress in mobile, built on the rapidly growing Android phone phenomenon, has many investors and even Google executives excited about the next stage of growth.
"You have this phenomenal success of Android, which is well past anything that I had ever hoped for," CEO Eric Schmidt told analysts on the call, according to a SeekingAlpha transcript.
Android devices, Schmidt said, offer a much wider search ad opportunity than Google enjoyed on the desktop computer, because the open platform can be innovative and competitive with other players, presumably Apple (AAPL).
"If you assume that search monetization on handsets will become equivalent to PCs and then eventually exceed it, which is my personal view, then it should be highly lucrative," Schmidt said.
With Google shares up more than 10% and crossing the $600 level early Friday, it looks like investors agree.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The major averages ended the midweek session on a flat note after spending the day inside narrow ranges. The S&P 500 hovered near the 2,000 mark for the majority of the trading day, but slumped to new lows during the last hour of action. The index then returned to its flat line, where it settled for the day. For the third day in a row, participation left a lot to be desired with just 487 million shares changing hands at the NYSE.
Equity indices opened with slim gains, ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
VIDEO ON MSN MONEY
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'