Stifel Nicolaus Ups Google to Buy from Hold

Analyst Scott Devitt notes business fundamentals and the recent addition of the company to the S&P 500 index

Stifel Nicolaus upgraded Google (GOOG) to buy from hold, citing business fundamentals and Standard & Poor's recent addition of the Internet company to its 500 Index.

Standard & Poor's Index Services late Thursday announced that Google will be added to the S&P 500 Index after the close of trading on March 31. S&P and BusinessWeek Online are both owned by The McGraw-Hill Companies.

Analyst Scott Devitt expects Google's share prices to be up materially this Friday morning. He adjusts to $435 his previous $404 fair value estimate on Google's stock price. He believes Google's business fundamentals support potential 20% upside in its share prices, while the S&P addition accounts for a remaining 7%. He notes that despite its competition, Google continues to gain market share, and now accounts for approximately 60% of the search queries made globally. He cut his $8.72 2006 EPS estimate to $8.57 and his $12.00 2007 EPS estimate to $11.64, in order to reflect management's focus on building infrastructure.

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