Google hits new high on analysts' reports

Shares of newly public Google Inc. on Tuesday hit a new high and posted their largest single-day percentage gain after five investment banks issued bullish reports on the leading Web search provider.

Google’s stock touched $127.40 before finishing the Nasdaq session up $8.60, or almost 7.3 percent, to $126.86 -- a gain of almost 50 percent from the company’s mid-August initial public offering price of $85. It was second on the Nasdaq’s net gainers list for the day.

Analysts for Morgan Stanley and Credit Suisse First Boston, co-lead underwriters on the Google IPO, initiated coverage with ratings of “overweight” and “outperform,” respectively. CSFB set a price target of $145.

“Google has helped change the direction of the Internet and has built impressive market share and an especially strong business model,” Morgan Stanley analysts, including Internet bull Mary Meeker, wrote in their note.

“We maintain that investors still underestimate the impact the Internet will have in changing business process and consumer behavior on a global basis,” the Morgan Stanley analysts said.

Elsewhere, JP Morgan initiated coverage of Google with an “overweight” rating; W.R. Hambrecht started Google with a “buy” rating and a target price of $140; and Thomas Weisel Partners launched coverage on Google with an “outperform” rating.

Analysts said that both the Web search and Internet advertising sectors were nascent markets. Google gets virtually all of its revenue from ads linked to Web search key words.

“We think Google is in the early days of an enormous opportunity, as online advertising still represents less than 3 percent of the global advertising market,” W.R. Hambrecht analyst William Lennan said in a note.

Even so, analysts also noted a number of risks for Google, including a rapidly changing landscape in Internet search and intense competition from the likes of Yahoo Inc. and, soon, Microsoft Corp.