Google jumps back above $400
After a turbulent first quarter, shares of the search engine rise to a two-month high as investors bet on strong earnings.
By Paul R. La Monica, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) - Shares of Google, the world's most popular search engine, surged above $400 Tuesday for the first time since early February on investor optimism about upcoming earnings.

Google (Research) jumped 3.8 percent in active trading on Nasdaq and at one point traded close to $405.

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The stock has soared nearly 20 percent since Standard & Poor's said late last month that it was adding the company to its S&P 500 index. Analysts said much of the buying during the past few weeks was by fund managers who run index funds that mirror the S&P 500. Google (Research) was officially added to the index at the close of business on March 31.

Steve Weinstein, an analyst with Pacific Crest Securities, said the addition to the S&P 500 was still a factor. "Now that Google is part of a major index, other portfolios that benchmark to the S&P 500 might be looking at it. So there could be some follow-on buying," he said.

For Google shareholders, the return above $400 has to be considered vindication after what could only be described as a tumultuous start to the year.

Google's stock first rose above $400 last November and kept going early this year on investor optimism about the health of the online advertising market. The shares hit a trading high of $475.11 in mid-January.

But after Google reported fourth-quarter earnings on January 31 that failed to live up to Wall Street's expectations, the stock stumbled. Even though profits jumped 82 percent from a year earlier, the stock fell 7 percent the day after the results were announced since it was Google's first earnings miss since going public in August 2004.

Things just got worse over the next two months.

Google suffered from a series of embarrassing communications missteps in February and March, prompting some analysts to chide the company's management team for not taking investor relations seriously enough. Google hit an intra-day low of $331.55 on March 10, more than 30 percent below its high just two months earlier.

There were also concerns about Google's role in agreeing to censor search results on its Chinese Web site as well as worries about increased competition from the likes of Yahoo! (Research), Microsoft's (Research) MSN and IAC/InterActive's (Research) Ask.com.

But now all appears to be forgiven. Being added to the S&P 500 was seen by some analysts as an endorsement of just how important Google is to both the U.S. and global economy.

What's more, investors are once again getting excited about the prospect of Google reporting strong first-quarter results since online search continues to be one of the hottest areas of advertising and Google's market share in search has increased. Google is due to report first-quarter numbers on April 20.

Marianne Wolk, an analyst with Susquehanna Financial, said investors were pleased by recent numbers from Web tracking firm comScore Networks that showed Google's search query volume rose 15 percent sequentially during January and February.

According to estimates from Thomson/First Call, analysts expect the company to report earnings, excluding charges, of $1.99 a share, up 55 percent from a year ago. Wall Street is predicting sales excluding revenue it shares with affiliate advertisers of $1.45 billion, which would be up 82 percent.

"There is a general feeling that quarterly figures should at least be in line with expectations and that Google could potentially exceed them," Wolk said.

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Google leaders stick with a $1 salary. Click here for more.

For a look at why Wall Street thinks Google's addition to the S&P 500 is a good thing, click here.

Analysts quoted in this story do not own shares of Google and their firms have no investment banking relationships with the company. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.