As Google returns to $500, bulls are calling for more

It's been more than a year since Google (GOOG) shares traded at $500, but it looks like Googlemania has officially returned. The search giant's stock price crossed that symbolic threshold on Tuesday and danced around the $500 mark before closing at $499.06, up half a percent. That put Google shares up 62 percent in 2009. And it means Google founders Larry Page and Sergey Brin -- each worth about $14.5 billion -- have seen their paper fortunes leap by $6 billion in 2009.

Is there more to come? On CNBC Tuesday, Mad Money's Jim Cramer said he expects Google to hit $600 next year. Urging investors to buy the stock, the former Goldman Sachs trader and founder (who who has appeared on his show wearing a straightjacket) declared Google is "too cheap."
Cramer has company. Traders appear very bullish on Google, according to Shaeffer's Investment Research, which noted Tuesday that Google's "10-day ISE/CBOE call/put ratio of 1.92 ranks above all such readings taken during the past year, underscoring the extremely bullish bias from the speculative options crowd." As Google's share price has soared amid a bullish market in 2009, analysts have been increasing their price targets and peppering their client reports with positive statements about the web search leader.

Two positive analyst reports come out on Tuesday. Canaccord Adams analyst Jeff Rath reiterated his "buy" rating on Google and lifted his price target to $560 from $480. Google's fourth quarter "could have much more upside than the Street is modeling," he said, according to Tech Trader Daily.

At the same time, Benchmark Co. analyst Clayton Moran maintained his "hold" rating on the stock, but lifted his price target to $500 from $430, "to reflect the increased overall market valuation and a shift to 2010 estimates as the foundation for valuation analysis."

Earlier this month, Ben Schachter, who covers Google for Broadpoint AmTech, affirmed his "buy" rating and $520 price target, which he raised in July from $480 in May. "Google is working to help advertisers spend more money with the company (which advertisers want to do as long as they are seeing returns)," Schacter wrote in a note to clients, earlier this month.

"Google is achieving this by helping advertisers increase ad effectiveness (measured by ROI) through new/better tools, as well as through new ad formats (video, images, products, local, etc.)," Schachter wrote. "With 80% of Google advertisers not maxing out daily budgets, Google is focused on using these new tools and ad formats to close the gap."

Similarly, Brian Pitz, who covers Google for UBS, reiterated his "buy" call on the stock -- which he initiated in August -- and price target of $525. "Major new features rolled out to advertisers in Q3 include a bid simulator, search based keyword tool, keyword alerts, and the ability to add ad extensions such as location information seamlessly," Pitz wrote in a note to clients.

"We expect these enhancements to have a positive long-term impact on Google's penetration among small and medium advertisers as it increases the ease of use of its advertising tools, which in turn should attract a greater share of advertising dollars," Pitz wrote.

If Cramer and these analysts are right, $500 could be just another benchmark left in the dust by Googlemaniacs.
Read Full Story