NEW YORK – Google has retaken the role of tech sector superstar with a stunning stock rally as rival Apple falters.
Google has hit fresh all-time highs in recent weeks, and closed Friday at $831.52, capping a nearly tenfold rise from its public offering price in 2004 of $85. Shares in the firm are up about 17 percent so far this year.
Part of the explanation comes from the rise of its Android mobile operating system, at the expense of Apple. Android is free but gives Google the opportunity to deliver more services and ads to users. “The negativity that is surrounding Apple at the moment is giving positivity to Google,” said Gartner analyst Carolina Milanesi.
Apple, which traded as high as $700 last year, has slumped more than 35 percent and ended Friday at $431.67.
For Google, “there’s a lot going forward at the moment,” Milanesi said, noting that the company is successfully “getting consumers into their ecosystem.”
Google now appears poised to beat Apple to the symbolic $1,000 share price, some analysts predict. Analysts at Jefferies said Google set a price target for $1,000, saying it has been benefiting from a wide range of services beyond its traditional Web search ads, including shopping and mobile ads.
Android now has a 70 percent share of the smartphone market, which “ensures that Google retains a large share of the mobile search market,” research firm Trefis said. “Another reason that investors are excited about Google’s stock is the fact that more than 50 percent of its revenues are generated from markets outside the United States,” Trefis said in a note. “This means that Google’s revenues have ample exposure to Asia, Africa and Latin America, all of which are expected to grow at an accelerated pace over the next few years.”
Analysts say a shift to the mobile Internet is positive for Google, which is also producing its own hardware, including smartphones and tablets.
In general, analysts are less fearful on Google’s ability to maintain growth during the mobile usage shift, and many see an opportunity for revenue acceleration,” Bank of America’s Justin Post said.
Google has been able to tweak its AdWords software, which delivers commercial messages based on a user’s profile, to squeeze more revenue from mobile than it has until now, analysts say.
Google is also starting to see potential for YouTube, the video-sharing service that has produced little revenue until now.
Google has been working on other projects, including its own high-end Chromebook Pixel laptop computer and Google Glass, a wearable device expected later this year. Milanesi said that Google will not try to replicate Apple by getting a lot of revenue from hardware. “Hardware is serving their services,” she said.
One sore spot for Google is its Motorola Mobility unit, the mobile phone maker acquired for $12.5 billion. Some 1,200 jobs are being cut at the division after 4,000 last year. “Google needs to figure out what to do with Motorola,” said Trip Chowdhry at Global Equities Research, claiming that Motorola “hasn’t had a single hit” in recent years.
“Within six months, Google needs to take a hard look at Motorola,” Chowdhry said. “If they can’t deliver, the whole Motorola should be closed and shut forever.” Chowdhry noted that Google could see its momentum slowed by regulatory problems, even though it avoided antitrust action in the United States.
Google is under scrutiny on privacy and monopoly grounds in Europe, and China is also concerned about Android’s dominance. “When you grow so big, you get in the eyes of all regulators and antitrust authorities,” Chowdhry said. “So far, Google has been very smart, quite good at dealing with them,” Chowdhry added, noting, however, that this was “an ongoing concern.”