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Will Google hit $1,000 or is it the next Apple?

May 14, 2013: 1:34 PM ET
Google's stock is trading just shy of $900. Could a quadruple-digit price be far behind?

Google's stock is trading just shy of $900. Could a quadruple-digit price be far behind?

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

Is Google Glass rose-colored? That's clearly the right hue for investors.

Shares of Google (GOOG) are up more than 25% so far this year and the stock hit a new all-time high above $888 Tuesday morning.

So naturally, many investors are not just wondering if Google will soon hit $900. They are fantasizing about a quadruple digit stock price. After all, Google would "only" have to climb another 13% or so to get to $1,000. (Google, you may recall, is planning to eventually split its stock. So it may not have this high of a price in the future. But the proposal is on hold for now due to a shareholder lawsuit about whether the split would give too much control to co-founders Larry Page and Sergey Brin as well as chairman Eric Schmidt.)

It does appear as if Google can do no wrong. The company continues to dominate search and is becoming an increasingly bigger player in other forms of online advertising thanks to YouTube. It's also emerged as the number one mobile platform thanks to its Android operating system.

Related: YouTube launches paid subscription service

Toss in work-in-progress products like the virtual reality Google Glass, driverless cars and Google's cable TV/Internet access service Fiber and you can understand why investors are as "super excited" about Google's future as CEO Page.

But has Google's stock run up too far too fast? Even though it seems like Google is invincible right now, weren't investors saying pretty much the same thing about Apple (AAPL) just eight months ago?

In some respects, Google near $900 might be even riskier than Apple was around $700.

The bear case against Google. For one, Google's stock is more expensive. It currently trades at 19 times 2013 earnings estimates. Apple, at its peak, was trading at about 13 times fiscal 2013 earnings estimates.

Google is also a far less diverse (and more economically sensitive) company than Apple. Its revenues are derived almost primarily from advertising. Apple, meanwhile, has more than a quarter of its sales coming from products not named the iPhone or iPad. Yes, investors need to be worried that Apple has lost its mobile edge. But it still sells a decent amount of Macs and software.

Another possible problem for Google? It, just like Apple, may now be over-owned. Earlier this year, Google moved ahead of Apple among the stocks most widely held by hedge funds. AIG (AIG) is actually number one and Google ranked second.

Related: What we want to see from the new Android

So if there is any bad Google news, say earnings that miss forecasts or evidence that Apple is getting its mojo back when it releases the next iPhone, there are lots of big money managers that could look to take profits. That position could take a long time to unwind.

Nonetheless, it may be a bad idea to bet against Google.

The bull case for Google. It could easily get to $1000 a share sooner rather than later if the news remains this good. Analysts are expecting earnings to increase by about 15% this year and in 2014. Those estimates could be too low.

Google, unlike Apple, really doesn't have serious competition for its key business line. It dwarfs the Microsoft (MSFT)/Yahoo (YHOO) search partnership, as well as AOL (AOL) in search. Some argue that Amazon (AMZN) could give Google a run for its money in product search, but I don't see that happening just yet.

And even on the display (i.e. banners, videos and other non-search ads) side of the business, Facebook (FB) has yet to prove that it can generate revenue and earnings as effectively as Google. Facebook's net profit margin in the first quarter was 15%. Google's was 25%.

Related: Will Amazon vs. Google be tech's version of Godzilla vs. Mothra?

Google also has $50 billion in cash. Sure, that's a pittance compared to Apple's $144 billion iMountain. But Google is still growing rapidly enough that investors aren't pressuring the company to use that cash to buy back stock and pay a dividend.

If Google can continue to focus more on long-term growth as opposed to appeasing short-term investors, that's a good thing. And for the time being, Wall Street is happy to trust the decision making of Page, Brin and Schmidt.

While the jury is still out on whether Google's acquisition of Motorola Mobility will be a success, Google has proven itself to be savvy with most of its other purchases. YouTube and ad solutions company DoubleClick have been obvious successes for Google.

Related: Google tops Fortune's Best Places to Work list

Smaller deals for review company Zagat, travel software firm ITA and mobile ad platform AdMob have also helped the company expand into new areas. And then there's Android. Google bought it in 2005. Terms were never officially disclosed but many tech trade publications have reported that the price tag was just $50 million.

And perhaps the best thing Google has going for it is that this is not a company that is resting on its laurels. Earlier this year, it made a notable move in its executive ranks, shifting former Android head Andy Rubin to another role. Rubin was replaced by Sundar Pichai, who also runs Chrome and Google Apps. This has prompted speculation that Google may look to merge Chrome and Android into one operating system.

It would be easy for Google to just look at its ever rising stock price and proclaim that there's no room for improvement, no need to shake things up. But Google doesn't operate that way.

So while I realize that predictions of a shiny round number for a high profile stock smacks of gimmickry and can cynically be viewed as a sign of a market top, Google realistically could hit $1,000 and still be considered a decent bargain.

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Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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