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Google: On the Fast Track

Google (GOOG) got a lot of attention on Wednesday after announcing fourth-quarter earnings that far exceeded the Street's expectations. Investors pushed up the stock as high as $217, 13% higher than Tuesday's close.

Google may have investors' eyes popping, but don't run out and buy this stock blindly. We continue to believe that it is suitable only for investors willing to make a long-term, speculative investment.

Analysts at several investment firms reevaluated their outlook for Google upon hearing the earnings surprise. Reiterating their "overweight" rating for the stock, analysts at Prudential raised their price target to $260 (from $200). Credit Suisse First Boston analysts say the stock could reach $275 within 12 months. They rate the stock "outperform."

Google oglers were particularly impressed with the company's ability to increase advertising revenues and gain market share. Google "continues to be not only one of the fastest growing players in online advertising, but also one of the most profitable," analysts at Thomas Weisel say.

Prudential analysts note that the company's 127% year-over-year improvement in advertising revenue significantly outpaced the growth rate of Yahoo.

More search queries are performed on Google's site, say CSFB analysts, than on any other major search engine. And Google's proven ad-serving model will help the company increase its share of the advertising market in the future, say analysts.

The company cited new partnerships, strong traffic and the ability to convert clicks into cash as the drivers behind its fourth-quarter success.

At $206, Google sells for about 53 times the average analysts' 2005 earnings per share estimate of $3.86 (according to Thomson First Call) -- a lofty P/E not for the faint of heart.

--Lisa Dixon

Google Inc. Click for larger chart Today's quote Use Stock Finder to make your own stock picks Last closing price: $569.96 200-day moving av.: $433 3-yr. annual return: 5% Trailing 12 mo. P/E: 37 Forward P/E: 25 Price-to-book ratio: 5 Price-to-sales ratio: 27.90 5-yr earnings growth: 66% PEG ratio: 0.00 More