NeoMedia Technologies, Inc (NEOM)

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OT Wow! Piper raises Google price target to $600
Tue Jan 3, 2006 11:38 PM ET

http://today.reuters.com/business/newsArticle.aspx?type=ousiv&storyID=2006-01-04T043849Z_01_BAU3...

LOS ANGELES (Reuters) - Piper Jaffray on Tuesday raised its price target on shares of Internet search provider Google Inc. (GOOG.O: Quote, Profile, Research) by 35 percent to $600 from $445.

The new one-year target is the highest of 24 brokers with model prices on the stock, according to Reuters Estimates.

Piper analyst Safa Rashtchy estimated that Google will continue to generate strong, double-digit sales and earnings growth through 2007 and gain market share as well.

Google is the leading Web search provider in the United States, reaping virtually all of its revenue from advertising. Its shares, which made their debut at $85 in August 2004, hit an all-time high of $446.21 last month. The company now offers a variety of free Web services from maps and directions to e-mail, instant messaging and Internet phone calling.

"While the stock may have its ups and downs throughout the year, we believe it will reach $600 by the end of 2006 and we prefer to have one 12-month price target rather than raise it every quarter," Rashtchy said in a client note.

Google, whose Web search service is so mainstream that its name is sometimes used as a verb synonymous with "look up on the Web," was the subject of intense interest even before its blockbuster initial public offering. Its aggressive expansion plans and brisk growth have continued to fuel that interest.

The Silicon Valley company recently took a 5 percent stake in Time Warner Inc.'s (TWX.N: Quote, Profile, Research) AOL Internet unit, boosting its Internet search market lead against key rival Yahoo Inc. (YHOO.O: Quote, Profile, Research) and industry newcomer Microsoft Corp. (MSFT.O: Quote, Profile, Research)

A Los Angeles Times story on Sunday, citing what it called speculation, said Yahoo had rebuffed an $80 billion bid from Microsoft after the software giant lost out to Google in the AOL deal.

In that same story, the paper cited sources who said Google has been in negotiations with retailers such as Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) to sell an inexpensive personal computer that would provide Internet access and run an operating system from Google, rather than Microsoft.

A Google spokesman was not immediately available for comment.

NEW TARGET

Rashtchy's new target for Google represents a multiple of 50 times Piper's estimated 2007 earnings per share, excluding items, for Google of $11.91, he said.

Robust growth in spending on Internet advertising has bolstered expectations for companies like Google and Yahoo, whose own revenue and profits have expanded alongside the market.

Internet advertising revenue for 2005 could rise more than 25 percent to surpass $12 billion, according to a recent forecast from Interactive Advertising Bureau and PricewaterhouseCoopers.

Google trades at around 48 times analysts' 2006 per-share earnings estimates. Yahoo Inc. (YHOO.O: Quote, Profile, Research), Google's closest rival, has a multiple of just over 52, while Web auctioneer eBay Inc. (EBAY.O: Quote, Profile, Research) is 43, according to Reuters Estimates.

"We believe Google is an iconic company that, like Microsoft and eBay before it, has defined a new and vital industry," said Rashtchy.

He added that such market-leading technology companies have traditionally traded with peak valuations in the range of 50 times to 60 times earnings before items.

Software giant Microsoft Corp. (MSFT.O: Quote, Profile, Research) has been investing heavily in search and aims to challenge Google on the Web and the desktop, where it has made its fortune selling software. Microsoft trades at a multiple of 20 times 2006 earnings estimates.

JMP Securities has the second-highest price target on Google shares. It boosted its target on December 21 to $575 from $400.

Google shares closed up 4.9 percent at $435.23 on the Nasdaq. Yahoo gained 4.4 percent to close at $40.91 and Microsoft finished 2.6 percent higher at $26.84.

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