Since Google (Nasdaq: GOOG ) came public, it's had a monstrous run-up by any measure. Google's total returns since that August 2004 IPO trail only China Life Insurance (NYSE: LFC ) and Apple (Nasdaq: AAPL ) among large-cap companies.
Despite those gains (and even flirting with $500 per share for the past few months), Wall Street remains bullish on the company. According to Thomson/First Call data, 34 of the 39 analysts covering Google rated it a "buy" or "strong buy."
So you could say we were more than a little surprised when Motley Fool CAPS investors voted Google as the worst stock for 2007.
It's important to search for good stocks as you hunt for the 10-baggers of the world, but it's equally important that you spot the losers. Our Fool community believes Google is one to avoid in 2007.
But most of us use Google as our primary search engine (it's become a verb, after all). Its ad technology is innovative and effective. It has tons of cash on hand. So what has Google done that has caused so much pessimism among individual investors?
Apparently quite a lot.
The bears are restless
In his bearish case, Chuck Saletta noted that Google had two major problems: size and competition.
To the first point:
With more than $9.3 billion in trailing revenues, every percentage point in growth requires more than $93 million in incremental revenue. That's new business that must be generated while the company maintains its dominant position in its existing operations. With so much of its revenue tethered to the ever-fickle advertising market, that's an exceptionally difficult proposition.
And to the second:
Google has a tremendous first-mover advantage when it came to successfully monetizing Internet searching with contextual ads. That's a great start. Now, however, it has a gigantic target painted on its back. Entrenched competitors Yahoo! (Nasdaq: YHOO ) and Microsoft (Nasdaq: MSFT ) see dollar signs. Microsoft, especially, has a reputation for successfully coming from behind and ultimately dominating a market. Plus, with its war chest of cash nearly triple Google's and its cash flow from operations exceeding Google's revenue, Microsoft certainly can keep the battle going for quite some time.
These are points that Google bulls have to at least consider, even if they don't necessarily agree with the interpretations.
A whole lot of opinions
Google is actually the third most-rated stock in our CAPS database (behind only Microsoft and Apple), and more than 3,000 investors have chimed in on CAPS to say whether they believe Google will outperform or underperform the market going forward.
Let us know what you think about Google or any of the stocks you follow by joining Motley Fool CAPS, our new (free) investing community. Just follow this link to get started.
Todd Wenning owns call options on Sirius Satellite Radio but has no financial interest in any of the other companies mentioned. Yahoo! is a Motley Fool Stock Advisor pick. Microsoft is an Inside Value choice. XM was once a Rule Breakers selection. The Fool is investors writing for investors.