What's next for Google's stock?

(Money Magazine) -- Investors seeking clues on how Google's new CEO would lead the search engine firm sure didn't like what they saw in the company's first-quarter earnings results.

The stock has dropped below $520 -- nearly 20% off its peak in January, when the company announced that Eric Schmidt would be stepping down and co-founder Larry Page would take the reins.

The irony is, the cheaper price comes as Google seems to have finally found another key area of growth beyond basic online search.

The bears worry that Google (GOOG, Fortune 500) has had trouble breaking into lucrative new markets like social media. The company still gets most of its revenue from ads stemming from its search engine and company-owned sites like YouTube.

But the bulls argue that Google's core business is still so big because that revenue keeps growing so fast -- 32% in the first quarter vs. the same period a year ago.

True, the allied forces of rivals Microsoft's (MSFT, Fortune 500) Bing and Yahoo (YHOO, Fortune 500) are cutting into Google's share. Google's share of the online search market has dropped to 64% from 72% last summer. But that's still nearly two-thirds of the market.

And Credit Suisse analyst Spencer Wang says Google's search business should keep growing in the mid-teens annually for the next five years. ('Google's stealth multi-million business')

The company stumbled with Google Checkout, a competitor to PayPal. And it was late to the game with Google Offers, which is trying to take on Groupon.

But the firm is gaining traction in mobile search, says Ken Allen, manager of T. Rowe Price's Science & Technology Fund, which owns the stock.

Traffic from mobile devices is rising because the Android operating system is thriving -- more than 350,000 Android smartphones are activated every day.

Allen says the stock is cheap in light of this and other sources of growth. Google's P/E ratio is 19, down from its five-year average of 35. The last time the P/E was this low was in late 2008 -- since then, the shares have nearly doubled. ('Google begins war against Windows')

A big question for Google investors is whether the new CEO is up to the job. Earnings season was supposed to be Page's introduction to Wall Street -- and it was widely viewed as a disaster.

Google's expenses shot up in the quarter thanks to raises, new hires, and a costly marketing campaign for its Chrome web browser.

The spending spree suggests a lack of discipline, says Citigroup analyst Mark Mahaney. And Mahaney also argues that Page has yet to lay out a comprehensive plan for how Google will break into social media, which is driving e-commerce and dominating online traffic. Last year Facebook overtook Google as the web's most visited site. ('How Google is going after Facebook')