Google Inc.’s stock price tumbled by nearly 3 percent Wednesday as exasperated analysts scolded the company for a series of events that has confounded investors.
In the past five weeks, Google has sprung three significant surprises on the stock market:
- An abnormally high tax rate that undercut its fourth-quarter earnings;
- The specter of slowing growth, raised in unscripted remarks by its chief financial officer, George Reyes;
- The inadvertent release of internal documents that discussed concerns about flagging profit margins this year.
The Mountain View-based company disclosed the last gaffe in a Securities and Exchange Commission filing late Tuesday, delaying investor reaction until Wednesday.
Google’s shares fell $10.57, or 2.9 percent, to close at $353.88 on the Nasdaq Stock Market. The stock price has fallen 26 percent from its Jan. 11 high of $475.11 as investors fret about the recent credibility issues, as well as the competitive threats to the Internet’s leading search engine.
As they dissected the company’s leaked financial forecasts, analysts also chastised Google for repeatedly confusing investors.
“The company’s pattern of financial miscommunication is challenging our enthusiasm for the shares,” Citigroup analyst Mark Mahaney wrote in a Wednesday research note. Despite those misgivings, Mahaney reiterated his belief that Google’s stock price will hit $490 during the next year.
In a report titled “Goofing At Google,” Oppenheimer & Co. analyst Sasa Zorovic warned the company’s missteps have increased the risks of owning the stock.
RBC Capital Markets analyst Jordan Rohan derided Google as “very sloppy” and called upon the company to abandon its policy against giving regular financial guidance to investors — a common practice for most large technology firms.
“Google appears to be miscommunicating on a regular basis. Clearly, some things need to change,” Rohan wrote. With more than $100 billion in wealth at stake, “Google owes its shareholders to issue financial guidance.”
In Tuesday’s SEC filing, Google reiterated its policy against making earnings projections. Company co-founders Larry Page and Sergey Brin don’t want to set quarterly targets because they are constantly pursuing longer-term goals — a strategy that might require Google to forgo short-term growth.
Google also advised investors to disregard its internal forecasts, which were briefly posted last week on the company’s Web site.
The projections envisioned $9.5 billion in 2006 revenue, which would be about 55 percent higher than 2005’s sales of $6.1 billion.
The notes, prepared last fall for a planning session, also mentioned the possibility of lower profit margins amid stiffening competition for the online traffic that drives Google’s advertising sales.
The presentation ended with an optimistic prediction that Google should be able to exceed its $9.5 billion revenue goal for 2006 — something many analysts also expect the company to accomplish.
But Goldman Sachs analyst Anthony Noto dimmed his financial outlook for Google after reviewing the rare glimpse at the company’s internal forecasts. Although he continues to recommend the company’s stock, Noto decreased its 2006 earnings estimate to $8.87 per share, down 14 cents from his earlier projection.