Google at $600?

Safa Rashtchy has started off this year with a high profile. The first analyst that I heard on the radio on the way to work was Piper Jaffray's Mr. Rashtchy being interviewed by CNBC about his prediction that Google will hit $600 in 2006. This follows an increase of 115 percent last year. "Doesn't it make you nervous that you have the highest target among analysts that track this stock?" the interviewer asked. Mr. Rashtchy responded that this target represents a multiple of Piper's estimated EPS for Google of $11.91, not at all out of line for stocks with this kind of growth.

The primary reason Mr. Rashtchy is so enthusiastic about the stock is that he expects Google will continue to increase its share of the rapidly growing Internet search market. In particular he expects Google Base will contribute "meaningful" revenue by the end of the year.

Earlier this week a New York Times article about the growth of online purchasing over the holidays indicated that 33 percent of households made an online purchase, up 10 percent over last year. The growth is coming from traditional brick-and-mortar stores that are getting more sophisticated in reaching their customer base. The traditional online leaders eBay and Amazon got their share, but it took advertising and search dollars to get people to shop online at traditional stores. Again, Piper Jaffray's Safa Rashtchy was quoted, "It is getting harder to make money online." He clearly believes a major beneficiary will be Google's ad network.