Google by the Numbers

It's only a big, round number, but it is one that generates headlines and starts arguments: Google $600.

Shares of Google passed that threshold today, a little bit more than 10 months after the stock first passed $500, but less than two months after it last crossed $500. It took more than a year for Google shares to go from $400 to $500. (Google made its stock market debut at $85 a share in August 2004.)

Can online advertising fuel gains so quickly that Google shares will rise to $700 before long?

Or has Google already grown so big, so fast, that it will face a future of gradually slowing returns? As it dominates, will Google turn into what Microsoft has now become for investors? In July, in what might have been a foreshadowing of that fate, Google reported second-quarter results that disappointed investors as expenses grew to keep stoking growth.

Yet the Google juggernaut rolls on. Its share of the search market rose to 56.5 percent in August from 55.2 percent in July, according to ComScore. And if you are betting on the internet, what are your big-cap alternatives? Google's price-earnings ratio is lower than that of Yahoo's. Google's public float is also much smaller than Yahoo's, at about 231 million shares, bolstering demand.

What ignited the recent surge that put the stock above $600 was a new price target of $700 a share from a Bear Stearns analyst, joining ThinkEquity Partners, which has been bullish on Google from Day One. (The consensus among analysts is around $610.)

There is no doubt some optimism about Google's third-quarter results, which will be released next week, and there is buzz about its ambitions in wireless.

Google now has a market value that exceeds that of Wal-Mart. Among technology companies, only Microsoft and Cisco Systems are bigger.

How high can Google go? How about $2,000 a share? That is the number that Henry Blodget, who in his previous life gained fame for a call of $400 on Amazon.com shares, is putting on Google.

But $2,000 a share was not a bubblicious signal for Stuart in the old Ameritrade ads to light a candle: it was $2,000 in 20 years, or an annual return of 6 percent.

That would be still be impressive, but it means "the company will have to post heroic numbers just to justify today's stock price, let alone $2,000," he writes.

Many big companies trade at 20 to 40 times estimated free cash flow, if not much less, Blodget notes. Google currently trades at about 60 times - a very difficult multiple to maintain for a long period.

So the $600 question, if not the $2,000 question, is whether you believe that Google can do what no other company has been able to do.

Jeffrey Cane