NEW YORK – Shares in Google Inc. (GOOG) surged 9 percent on Friday after the Web search leader's quarterly results beat Wall Street forecasts, prompting several analysts to raise their target prices on the stock above $500.
Google reported on Thursday a 60 percent rise in net profits on a 79 percent jump in revenue as it recovered its momentum following disappointing results in the prior quarter.
Goldman Sachs (GS), Lehman Brothers and Merrill Lynch (MER) raised their price targets for Google shares well above the $500 mark, citing the company's ability to pull in a greater share of Internet advertising dollars than its competitors.
"Google's growth continues to outpace the search industry ... and we expect this to continue as the company monetizes additional verticals such as Maps, Local, etc." Goldman analyst Anthony Noto wrote in a research report.
As recently as February, several bouts of negative news sent Google shares as low as $330, particularly concerns the company would not meet Wall Street's bullish growth forecasts.
But new agreements with advertising affiliates to expand the reach of its paid search listing programs, the introduction of advertising on its Google Maps locator system and the primacy of its search technology have kept it ahead of rivals.
Merrill Lynch upgraded its rating on Google to "buy" from "neutral" and bumped its price target on the share to $540, while Lehman Brothers raised its price target on Google to $530 from $450.
Merrill Lynch analyst Justin Post said his price target was based on a price-to-earnings multiple of 44.
Goldman's Noto recommended buying Google shares, estimating their value at $525.
Risks to such growth include efforts by Yahoo (YHOO) and Microsoft (MSFT) to push back, margin pressures as Google invests more in its computer networks and data centers and the "lack of company disclosure that makes revenue and margin trends less predictable," Merrill's Post wrote in a research report.
Google share rose $29.05 to $444.05 in late morning trading on Nasdaq, after moving as high as $450.72 earlier in the session. The stock's record high near $472 was hit in January.