Predictions are high for Google

When search giant Google asked for $85 (£50) per share in its initial public offering on 19 August, 2004, more than a few people thought its wunderkind founders had perhaps drank a bit too much of their own Kool-Aid.

Fifteen months later, it looks like, if anything, they underestimated investors' enthusiasm for their fast-growing company.

Google's stock price continued its upward march on Monday, finishing the day at $423.48 (£246.96) per share, giving it a $125bn market capitalisation. That was just a smidge below its all-time high. Still, Monday's closing makes Google more valuable than eBay and Amazon.com combined, dwarfs Time Warner's $84.35bn market cap and even tops networking king Cisco, which has a $107.4bn cap.

The question now, of course, is just how high can Google go?

"Take an '8' and turn it sideways. You get the sign of infinity. That's what a lot of people think [Google] is worth these days," said Scott Devitt, an analyst at Legg Mason Wood Walker.

Will it take Google long to leapfrog Intel and its $161.9bn cap? And is it so far-fetched to imagine Google's cap one day surpassing even Microsoft and its $295.4bn market cap, to become the most valuable company in tech?

Though no analysts will go quite that far, more than a few think Google still has plenty of room to grow. A week ago, for example, UBS Securities analyst Benjamin Schachter raised the firm's price target on Google from $430 to $500, saying in a research report that Google "is a paradigm-changing company, and we believe in its long-term ability to leverage its infrastructure and talent in innovative ways."

Analysts who are raising the price target for Google's shares over the next six to 12 months are basing their forecasts mostly on what's called the forward price-to-earnings ratio, or forward P/E. That's the price of a stock divided by the analyst's forecast for next year's earnings. The P/E indicates how much investors are paying for a...

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