Google Stock to the Moon? Why Not?

Now that Google shares have cracked the $600 barrier, maybe Henry Blodget’s $2000 target doesn’t seem so outrageous.

Think about it, Google’s share price is based on several key elements: fundamentals (sales, profits, etc.), the health of the online advertising market, and, probably most important, the emotional state of investors.

Google’s revenue will likely climb by 50% this year to $15-billion while profits will rise to $4-billion to $5-billion, compared with $3-billion in 2006. While percentage-wise, Google’s growth is not as spectacular, it’s still very impressive.

Meanwhile, the online advertising market grew to nearly $10-billion in the first six months of the year in the U.S. – with Google accounting for about $3-billion. While concerns about inflation and interest rates may impact advertising overall, online advertising appears to have plenty of momentum as media buyers shift more of their budgets to the Web from traditional media. (Google is also benefiting as performance based advertising takes over from CPM ads.)

Finally, the madness of crowds/investors. Every time, Google shares pass through another benchmark, it catches the attention of investors who have watched the stock soar from its $87-a-share IPO. At $600 a share, Google is expensive for the average retail investors but institutional investors could easily justifying jumping on the bandwagon, especially those who passed on the IPO because they thought it was expensive!

Read/WriteWeb notes that Google’s ever-rising stock price has spawned four billionaires (Sergey Brin, Larry Page, Eric Schmidt and Omid Kordestani) and hundreds of employee millionaires. Howard Linzon’s long on Google, while Google Operating System said the future is bright as Google prepares to move into the social networking and collaborative software market.