Remember our old Daily Double feature? The one that took a closer look at companies that had doubled over the past year? If you don't, it's understandable. It's been more than four years since we shut down the feature. However, during this holiday-shortened trading week, I'm feeling awfully nostalgic. So don that throwback Fool cap, and let's take a look at stocks that have had it going on lately.
How did it double?
Remember when some folks were saying that Google (NASDAQ:GOOG) was overpriced when it hit the market last summer at $85 a pop? Exactly. Google went public with a big name and a big share price, but that was no match for earnings momentum, as the company went on to routinely topple expectations every quarter.
With 99% of its revenues coming from online advertising -- and a ninth of that coming from Time Warner's (NYSE:TWX) AOL -- the company may have been putting all of its eggs into the same basket. But, man, what a basket! With sponsors signing up for Google's AdWords contextual advertising program and publishers of all sizes signing up the Google AdSense program to redistribute Google AdWords, Google has managed to keep both supply and demand soaring.
Revenues this past quarter surged 96% higher, with earnings growing even faster. Yes, nothing persuades the market to inch your shares higher like healthy financial performance.
Business description
Google started out as an algorithmically superior search engine developed by a pair of Stanford techies named Larry Page and Sergey Brin. It wasn't long before established portals such as Yahoo! (NASDAQ:YHOO) began to rely on Google's results over their own. The result was a corporate monster. Knowledgeable Internet users soon started to bypass the other portals and went directly to the source, making Google their home page.
Google didn't pioneer paid search. Yahoo! Overture and MIVA (NASDAQ:MIVA) were toiling away profitably in this niche well before Google crashed the party and perfected the method.
Globally, Google attracts 360 million unique users every month. More than half of that traffic now comes from outside the United States.
Signs that Google would be a double
By refusing to provide Wall Street with any type of fiscal guidance, it was easy to see how a dynamic company like Google would leave the MBA analysts in the dust. Google went on to obliterate the market's profit projections in four of its first five quarters as a public company.
This doesn't mean that silence is the best corporate policy. History is littered with quiet losers, after all. However, Google's knack for staying ahead of the curve is impressive. It acquired Blogger before blogging was popular. It got into social networking through Orkut before that trend took off as well. The company's scalable growth, allowing margins to widen, was a clear path to market dominance. As surely as you were probably leaning on Google.com 10 to 15 minutes ago, you know that Google is a hard habit to break.
Where to from here?
Google has doubled a few times over since its IPO in August 2004. Unfortunately, it's not a simple "rinse, repeat" game at this point. Google is now a $120 billion company. If it were to double from here, it would mean that the stock would appreciate in market value by more than the heady gains of its brief yet brilliant trading life.
But it's not all downhill for Google, either. Last month, three respected firms raised the Internet darling's target price to $450. Yesterday, UBS became the first Google watcher to provide a $500 12-month price target. That may seem like a lot, but it would represent just 22% in capital appreciation on Google's behalf.
So share-price growth may very well be measured in teaspoons at this point. And any weakness in online advertising would deal a heavy blow to Google, naturally. That makes the risk-reward picture a bit bleak. But remember now -- this is Google we're talking about. If it's been able to do one thing right during its brief public tenure, it's that it has kept Wall Street huffing and puffing behind it, quarter after quarter.
Time Warner is a Motley Fool Stock Advisor recommendation.
Longtime Fool contributor Rick Munarriz may be an unofficial member of the Google Fan Club, but he does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
