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Where Are the $1,000 Target Prices on Google?

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If we've learned anything from Apple's (NASDAQ:AAPL) rise and fall over the past couple of years, it's that analysts' target prices tend to follow, or at least roughly, correlate with the underlying stock's movement.

Check out this chart from Bloomberg. Note: the orange line is the average analyst target price, while the white line is the actual stock price.


Click to enlarge

In other words, the more a stock goes up, the more it's loved, and in turn, target prices get moved higher and higher.

Why? Well, it's simply human nature to extrapolate the present into the future.

So let's look at what analysts are saying about the other 900-pound tech gorilla, Google (NASDAQ:GOOG).

According to Bloomberg, the average target price on Google is just $823, with the highest being the $900 forecast by Cantor Fitzgerald and Crédit Agricole.

I think people should watch for a bunch of target price increases on Google now that it's up 14% for the year, having passed the $800 mark to hit all-time highs.

See that pop in the stock price (white line)?  Frankly, I'm surprised that there isn't at least one $1,000 target price on the name in reaction to the stock's surge.



But I would urge caution to those looking for such a forecast to mark a top.

First, unlike the time period in which Apple peaked, Google has a lot more doubters. As it stands now, here is the ratings distribution among Google analysts:

Buys: 53%
Holds: 44%
Sells: 3%

When Apple topped out, it was universally loved. At the September 21, 2012 $705 top, analysts' ratings were distributed as follows:

Buy: 86%
Hold: 10.5%
Sell: 3.5%

That's a huge difference in sentiment.

And on April 26, 2012, Topeka Capital Markets analysts Brian White got a lot of attention for raising his Apple target price to $1,111. The stock closed at $607.70 that day -- and ended up rallying another 16% before the aforementioned big top peak.

Remember, anecdotes are fun, but in isolation, completely useless.

There are lots of folks out there calling for a top in Google, but I suspect they should reign in their confidence a bit.

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