A Merrill Lynch analyst sees some short term risk in place for shares of high-flying Google, and a need for long term revenue alternatives.
Shares of Google retreated from their record high of $431.24 on Monday, closing at $423.48. MarketWatch reported Lauren Rich Fine at Merrill Lynch reiterated a “neutral” rating on GOOG, but not without some queasiness:
For the short term, Fine feels the stock has become somewhat aggressively valued, while over the long term, the company needs to develop revenue streams beyond Internet search. “The shares are likely to be increasingly sentiment driven; Google is starting to attract more negative publicity as it has become incredibly dominant online and has started to encroach on other companies’ businesses,” Fine said. “This is not a stock for those with a weak stomach.”
Google does not provide earnings guidance in its quarterly financial reports, so how they might address a need for additional revenue paths is not formally known.
On the search advertising side, Yahoo debuted its Publisher Network over the summer, a direct competitor to AdSense. Microsoft has been working feverishly to get its new AdCenter advertising system formally rolled out in the U.S.
AOL, a long-time Google partner, has been aggressively courted by Microsoft and Google. Should Microsoft hammer out an agreement that gets it a stake in AOL, Google stands to lose about 10 to 12 percent of its revenue.
Our own Jason Lee Miller thinks Jim Cramer’s enthusiasm, UBS analyst Ben Schacter’s prediction, and a Mae West quote all point to Google hitting the $500 mark. Alexander Pope would probably offer this view:
“Fools rush in where angels fear to tread.”
David Utter is a staff writer for Murdok covering technology and business. Email him here.
