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Google Beats Estimates, May Have Hit Ceiling

By: David Utter

The search advertising company enjoyed another fine quarter financially, but after hours movement in the stock could indicate the fun ride for investors is gliding to a halt.

Google Beats Estimates, May Have Hit CeilingEarnings of 3.18 per share easily topped average analyst expectations of 2.91, and Google's revenue arrived in line with the Oracular predictions from Wall Street. Before considering stock-based compensation and a tax credit, earnings for the fourth quarter of 2006 were 3.29 per share.

GAAP net income of $1.03 billion easily outpaced the same period year over year. Q4 2005 delivered $372.2 million to the company.

"Our impressive performance in the fourth quarter demonstrates the continuing strength of our business model across Google properties and those of our partners," said Eric Schmidt, CEO of Google. "Our growing organization allows us to deliver ever increasing amounts of information and content to our users both through investments in search and ads as well as through strategic partnerships."

In after hours trading, one might think from the movement of Google's stock price that they laid an egg right in the middle of the trading floor. An hour after the markets closed, shares of GOOG had dropped by 11.00 to 490.50 per share.

The activity looks a lot like profit taking by investors. Trading volume during the day had been over double its average, with 11.9 million shares in play. Tomorrow's trading will be interesting to watch.

We have to wonder if Google will begin gliding to Earth, or if shares of the stock will drop into a valley before climbing back up again. There have been some heady predictions made for 2007. Piper Jaffray analyst Safa Rashtchy called for $630 per share, up from his prediction of $600. put their wild prediction at $1,000.

It comes down to the competition. Can anyone do what Google does, do it better, and do it this year? Yahoo is just getting its new, more Google-like ad system, rolled out to advertisers. Microsoft's self-service AdCenter debuted last year, but Microsoft doesn't have a publisher network like Google's .

2007 looks like it will be Google's year. The quarters of blowing away estimates by big margins may be over, but until someone can out-Google the company they will keep their place atop search advertising.


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