Google and The Analysts

I am loath to write an article about Google (GOOG) for the simple reason it will be one of about 1,000 written today, but I need to do so to make a point about the “analysts”.

My sentiment on Google has been the same for over a year and for those not familiar, here it is.

Everyone is aware of the recent axing of “price targets” for shares of Google recently. For those who are not, here they are below.

27-Mar-08 Stanford Research Reiterated Hold $615 to $500
27-Mar-08 Lehman Brothers Reiterated Overweight $644 to $580
25-Mar-08 UBS Reiterated Buy $590 to $570
20-Mar-08 Jackson Securities Reiterated Buy $815 to $600
20-Mar-08 RBC Capital Mkts Reiterated Outperform $675 to $530
28-Feb-08 Stifel Nicolaus Reiterated Buy $675 to $610
28-Feb-08 Oppenheimer Reiterated Outperform $715 to $600
26-Feb-08 BMO Capital Markets Reiterated Market Perform $690 to $590
01-Feb-08 AmTech Research Reiterated Buy $815 to $785
01-Feb-08 UBS Reiterated Buy $785 to $650
01-Feb-08 Bear Stearns Reiterated Outperform $700 to $650
01-Feb-08 Citigroup Reiterated Buy $775 to $650
01-Feb-08 Oppenheimer Reiterated Outperform $850 to $715
01-Feb-08 Stifel Nicolaus Reiterated Buy $725 to $675
01-Feb-08 RBC Capital Mkts Reiterated Outperform $725 to $675
01-Feb-08 Jefferies & Co Downgraded Buy Hold $725 to $600
01-Feb-08 Lehman Brothers Reiterated Overweight $714 to $644
24-Jan-08 Stanford Research Downgraded Buy Hold $735 to $615

Now, for those who may have forgotten, the recent rush to cut estimates comes only two months after the rush in the opposite direction to raise them. Again, for those who have forgotten, here those “predictions” are.

20-Nov-07 Credit Suisse Reiterated Outperform $800 to $900
06-Nov-07 Bernstein Reiterated Outperform $720 to $850
05-Nov-07 Oppenheimer Reiterated Buy $700 to $850
22-Oct-07 UBS Reiterated Buy $655 to $760
19-Oct-07 AmTech Research Reiterated Buy $685 to $815
19-Oct-07 RBC Capital Mkts Reiterated Outperform $690 to $725
19-Oct-07 BMO Capital Markets Reiterated Market Perform $545 to $690
19-Oct-07 Citigroup Reiterated Buy $600 to $775
19-Oct-07 Cantor Fitzgerald Reiterated Buy $650 to $750
19-Oct-07 Nollenberger Capital Reiterated Buy $650 to $720
16-Oct-07 Needham & Co Reiterated Buy $575 to $690
12-Oct-07 Oppenheimer Reiterated Buy $625 to $700
11-Oct-07 RBC Capital Mkts Reiterated Outperform $560 to $690
11-Oct-07 Stifel Nicolaus Reiterated Buy $620 to $710
11-Oct-07 Stanford Research Reiterated Buy $615 to $735
09-Oct-07 Lehman Brothers Reiterated Overweight $610 to $714
09-Oct-07 Banc of America Sec Reiterated Buy $620 to $670
05-Oct-07 Bear Stearns Reiterated Outperform $550 to $700
05-Oct-07 Nollenberger Capital Reiterated Buy $575 to $650

In the spring and summer of 2007, the urgency to ratchet up the target just was not there and the action was far more benign.

20-Jul-07 Bear Stearns Reiterated Outperform $600 to $550
10-Jul-07 UBS Reiterated Buy $580 to $655
25-Jun-07 JMP Securities Reiterated Mkt Outperform $580 to $625
20-Apr-07 UBS Reiterated Buy $560 to $580
20-Apr-07 Lehman Brothers Reiterated Overweight $560 to $610
20-Apr-07 BMO Capital Markets Reiterated Market Perform $525 to $545
20-Apr-07 Needham & Co Reiterated Buy $537 to $575
20-Apr-07 Banc of America Sec Reiterated Buy $601 to $620
20-Apr-07 Am Tech/JSA Research Reiterated Buy $540 to $600
01-Feb-07 JMP Securities Reiterated Mkt Outperform $525 to $580
01-Feb-07 UBS Reiterated Neutral $535 to $560

So, what is the point? Look close at all the rating. What do they all have in common? The word “reiterated”. Almost without exception (there are a couple) the recommendation of the analyst has not changed. BUT, what they did change was the expectations of the stock price.

Look at UBS. In Feb. 2007 they said it would go to $560, in April they said $580 then in October 2007 they raised that to $760 (it never got that high) and then only two months later they cut it back to $650.

Currently Google’s share price sits at $450. Why does this matter? It is essentially the same price it sat at in Feb. 2007 when UBS made its first call. Now, did Google’s share price rise during the time frame? Yes. But, anyone who invested due to the UBS call in nov. 2007 has lost over 30% since then. As a matter of fact, if you invested after the April, 2007 price call you are underwater.

Another point here is that Google gives no guidance. This means the chasing by the analysts was done by themselves without ANY statement coming from the company that could have influenced them.

Yet, UBS is still saying buy the stock? The same scenario can be said of virtually all the analysts about. Despite the 30% plus drop in shares and the astronomical multiple they commanded despite the company’s size, the sentiment has not changed?

The point here is to totally ignore price targets. The move like a heard and have no correlation to the actual performance of the company or its stock. They chase a stock up or down and inevitably, shareholders get stuck holding a huge bag of losses….

Disclosure (“none” means no position):None

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