- The Washington Times - Wednesday, February 27, 2008

SAN FRANCISCO (AP) The focus on Google’s recent deterioration sharpened yesterday as investors reacted to the latest evidence indicating that fewer people in the United States are clicking on the Internet ads that generate most of the online search leader’s profits.

The unsettling trend, captured in a closely followed report from Internet research firm ComScore Inc., shoved Google’s shares to an 11-month low. The drop extended a slump that has lowered the company’s market value by 33 percent, or about $70 billion, during the first seven weeks of the year. The tech-laden Nasdaq composite index has declined by 12 percent during the same stretch.

The sell-off represents a sobering shift in Wall Street’s sentiment toward Google, whose dominance of the lucrative Internet search market had convinced many investors that the company would thrive even in a recession.

The ebullience helped propel Google shares to a peak of $747.24 in early November and kept it just below $700 as the new year began. The stock price closed yesterday at $464.19, down $22.25. The shares sank as low as $446.85 earlier in the session, a level that hadn’t been reached since last March.

Disappointing fourth-quarter earnings growth and ComScore data pointing to sluggish ad growth in January is causing more analysts to conclude that even Google may be pulled down by the sagging U.S. economy.

Looking ahead, some investors are worried about Microsoft becoming a more imposing competitor if it pulls off its proposed takeover of Yahoo.

“We don’t see a compelling reason to buy the stock right now, because we think there’s going to be a rocky few months ahead for Google,” said Stanford Group analyst Clayton Moran.

Other analysts say they still think that Google will deliver strong earnings and revenue growth this year. They attribute the recent slowdown in Google’s growth to deliberate changes that were made to weed out advertising links that don’t conform with the company’s policies or don’t appeal to consumers.

Although the revisions may hurt Google in the short term, Susquehanna Financial Group analyst Marianne Wolk reasons that the improvements eventually will pay off by displaying more ads that elicit consumers” interest — an upgrade that probably would spur more spending by Web surfers and marketers alike.

“We believe there is some room for optimism on several of these issues so that the outlook may not be as difficult as the market fears,” Ms. Wolk wrote in a research note yesterday.

SEARCHING FOR LOST GLORY

A report from Reston research firm ComScore Inc. pushed Google Inc.’s shares down 5 percent yesterday, to an 11-month low. Once-unstoppable Google’s market value has now fallen 33 percent this year, or about $70 billion.

515 8/27

519

529

560

567 9/24

594

637

645

675 10/22

711

664

634

677 11/19

693

715

690

697 12/17

703

657

638

600 1/14

566

516

517

530 2/11

508

464.19 2/26 Yesterday’s close: Down $22.25

Source: Yahoo Finance


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