Google Rises to Record on Investor Optimism on Growth Prospects

Google Inc. (GOOG), operator of the world’s largest search engine, closed at a record high after reporting earnings last week that topped estimates, buoying investor sentiment about growth prospects.

The shares advanced 2.6 percent to $775.60 at yesterday’s close in New York, their highest value since the company went public in August 2004. They have gained 34 percent in the past 12 months, compared with a 14 percent increase for the Standard & Poor’s 500 Index.

Google is benefiting from rising demand as marketers seek to advertise via mobile devices and local services, areas where rivals such as Facebook Inc. (FB) and Groupon Inc. (GRPN) also sell advertising. Fourth-quarter profit, excluding certain items, rose to $10.65 a share, the company said Jan. 22. Analysts on average had estimated profit of $10.50 a share.

“In all of the growth areas of online advertising, Google has a big presence,” Sameet Sinha, an analyst at B Riley & Co., said in an interview. “Rather than picking the best horse, here’s someone executing on all fronts.”

Sinha rates Google a buy, and doesn’t own any shares.

Google had more than 41 percent of all digital ad revenue in the U.S. in 2012, according to EMarketer Inc. In mobile, Google holds a 53 percent share, compared with 8.4 percent for Facebook. Google dominates the U.S. search-based advertising market, with a 75 percent share, according to EMarketer’s estimates.

Three-quarters of the 33 analysts covering Google rate the shares a buy, according to data compiled by Bloomberg. Those analysts have raised their target price for the stock, on average, to $824.83, from $796.66 a day before the company’s latest earnings report.

Sales at Mountain View, California-based Google rose 36 percent in the fourth quarter to $14.42 billion from a year earlier. The boost came after the average cost of ads rose 2 percent during the fourth quarter from the previous period, the company said.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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