NEW YORK (CNN/Money) -
Shares of Google Inc. fell more than 3 percent Thursday after the Web search giant warned that revenue growth rates would be unsustainable in the future.
The company, which has seen share prices more than double since its August initial public offering, said in a filing with the Securities and Exchange Commission that, while it believes revenue will continue to grow, the growth rate will not keep accelerating as it has been.
Shares of Google (Research) fell $5.68, or 3.3 percent, to $166.82 in late trading on the Nasdaq.
"Our revenue growth rate has generally declined, and we expect it will continue to do so as a result of increasing competition and the inevitable decline in growth rates as our revenues increase to higher levels," said the company's filing.
"Consequently, we believe that our revenue growth rate from the second quarter to the third quarter of 2004 may not be sustainable into the fourth quarter of this year and in future periods."
Despite the impact that the filing had on the stock, analysts had already been forecasting a slower growth rate for Google's revenue.
The company reported $503.2 million in revenue after traffic acquisition costs, which is the way that analysts measure sales from different search engines. That was up nearly 19 percent from the second quarter. Google posted only an 11 percent sequential gain in that measure of revenue in the second quarter.
But according to earnings tracker First Call, analysts are looking for revenue after traffic acquisition costs of $570.9 million, or only a 13.5 percent gain compared to the third quarter, followed by sequential increases of 8.8 percent in the first quarter 2005 and 3.5 percent in the second quarter. So, slowing revenue growth had already been built into most analysts' models.
Of course, analysts were also less bullish on the stock than investors have been since the IPO. First Call said it has a 12-month target price for the stock of only $145, or about 16 percent below Wednesday's close.
The company's filing also said it was offering to repurchase 23.4 million shares of stocks that had been held by current and former employees and contractors, as well as 5.2 million unexercised options.
That share repurchase offer is more than the 19.6 million shares it sold in its IPO. At current market prices, the company will not have to repurchase any of the shares, since it is offering only the price paid for the shares, between 30 cents and $80 a share.
But the offer stays open through December, so if the shares were to have a sharp fall in the next six weeks, the company could face some additional share repurchases.