These days Google Inc is on a roll, making it the $800 gorilla in the room. Its shares hit an all-time closing high of $821.50 on Monday, and some securities analysts are already forecasting the search company could soon be a $1,000 stock.
Google's surge to new highs has come as its Android software dominates the mobile phone market and it continues to lead in mobile advertising. The gains have put Google firmly in third place among U.S. companies in terms of market value after Apple Inc and Exxon Mobil Corp.
Google has been on a steep rise since late last year, hitting new highs multiple times, and is up 16.1 percent since the start of the year. That makes it the highest-priced stock in the S&P 500 by more than $100 and puts it within striking distance of the median analyst price target of $851 a share, according to Reuters data.
"It seems to be the big momentum stock right now," said Eric Kuby, chief investment officer at North Star Investment Management in Chicago, whose firm does not own Google.
At least two brokerages – Sanford Bernstein and Credit Agricole Securities – believe the stock could hit $1,000 a share before long, and several others have a price target of more than $900.
Still, at least one insider, has decided it is time to bail out of a big slab of his stock. Google Executive Chairman Eric Schmidt recently filed to sell roughly 42 percent of his stake in the Internet search company, citing "individual asset diversification and liquidity," according to U.S. Securities and Exchange Commission filings.
Schmidt owns roughly 7.6 million shares of Class A and Class B common stock. Google said in a filing in early February that Schmidt planned to sell the 3.2 million shares of Class A stock in a stock trading plan over a period of a year. At current value, that would be worth about $2.6 billion.
Wall Street has grown more sanguine about Google's transition towards a more mobile-focused strategy.
It has attempted to extend its lead in Internet search advertising onto a mobile platform, a shift forced by the increasing prevalence of smartphones and tablets, but that eats into margins. Over the past year, however, Google has managed to slow the average pace of ad-rate declines, while its Android platform continues to expand its lead over rivals such as Apple's iOS.
"Mobile search is doing well and mobile is the future," said Kerry Rice, an analyst at Needham & Co. "Few companies are as well positioned for the coming mobile-centric world we live in better than Google."
Meanwhile, the U.S. Federal Trade Commission ended an investigation into the company in January without any significant action.
Google shares received wide attention after their August 2004 initial public offering. At an $85 offer price, it was the most talked-about IPO at that time. The stock opened at $100 on its first day of trading, hitting $200 in January 2005 and then $300 in June of that year.
The stock is up 721 percent since its first started trading at $100. Its top investors include Fidelity, which owns 6.5 percent of outstanding shares. Vanguard Group and State Street Global Advisors also own at least 4 percent of its shares and BlackRock and T. Rowe Price have at least 3.5 percent, according to Thomson Reuters data based on filings to Dec. 31.
While investors have worried since its inception about how much money Google can make from online advertising, the company has garnered a lot of attention recently because of the popularity of its Android mobile software.
"We're at $800, I think you can certainly see this at $900," Rice said.
Still, on a valuation basis, the stock scores relatively low. Google is in the bottom 25 percent in a Thomson Reuters StarMine valuation that looks at expected growth rates in the next decade.
This intrinsic value, which estimates the cumulative annual growth rate in the coming 10 years using a blend of its own models and analyst estimates, puts Google shares at $680.40, suggesting the stock is overvalue.
Another factor in its valuation is Google's forward 12-month price-to-earnings ratio, which is 17.3, higher than the S&P 500's 13.5. A higher P/E suggests investors are pricing in higher earnings growth.
Conversely, Apple stock, which for years has been the darling of investors, but is down 21.1 percent since Dec. 31, is trading on a forward P/E of only 9.2.
"There's a lot of money that likes the tech sector and I think Google has kind of taken over from Apple," Kuby added.
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