Cutting Up Google

Some of the Wall Street loving that Google (NASDAQ:GOOG) accumulated over its first 18 months on the market has been squandered in recent weeks. This morning, Bear Stearns cut its price target on the company from $550 to $525. This comes on the heels of UBS cutting its projected price last week to $400. Others that lowered their target after digesting Google's analyst presentation earlier this month include Standard & Poor's and Goldman Sachs.

Most of the market-maven downshifts are tied to the company's inadvertent leak of its internal gross revenue target of $9.5 billion for 2006. With the implied top-line growth slowing to 57% and the company's cautionary stance a week earlier, the nervous Nellies have been in a hurry to come off their once outlandish price targets.

However, here is where it gets interesting. Let's look at Google's consensus profit estimates over the past few months.

Let's assume that the estimate will slip this week as the latest wave of tempered enthusiasm catches up to the numbers. What I find striking is that analysts chose to stick to their guns -- and kept rifling through their pockets for more ammo -- even though Google missed its profit for the quarter ending in December by a significant 13% difference.

In fact, over the past three months, the consensus profit per share for next year has grown from $11.16 to $12.05. These hikes came just as analysts were marking down the 2006 and 2007 profit targets of Google's search-engine peers, including Yahoo! (NASDAQ:YHOO) and InfoSpace (NASDAQ:INSP).

What does this all mean? It means that you should rely on more than just Wall Street-speak in formulating your opinion on Google. Keep in mind that this same collective pool of analysts has been way off in pegging Google's reality since it went public in August of 2004. They sorely underestimated its earnings potential through its first five quarters as a public company. Then they came up short in the sixth quarter without adjusting their models lower last month.

Google's March-ending quarter is going to be important. I would argue that it will be the most significant quarter in this young company's public life. Just be careful with whose targets you are rolling with this time. Your best bet, oddly enough, may actually be your own.

Longtime Fool contributor Rick Munarriz is a huge fan of Google, and it would be his homepage if it weren't for Fool.com taking up that piece of real estate. He does not own shares in any of the companies in this story.The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.