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Google reported fourth quarter earnings today and missed Wall Street's estimates by a country mile. Investors were looking for $10.51 per share. They got $9.50. This immediately gave some Google bears justification for cutting their target prices for the Internet search giant — and for making even more drastic pronouncements. For example (this is from MarketWatch):
“Is the post-Google era upon us?” asked analyst Scott Devitt of Morgan Stanley in a note to clients. He cut his price target to $590 from $642 while leaving his rating at equal-weight, or neutral.
Other analysts are keeping their calls for Google in the stratosphere. But the fourth quarter miss might be signaling something more ominous — or optimistic, depending on your perspective — than the end of the Google Age.
The beginning of the Facebook Age.
If Facebook stages, as expected, an IPO later this year, it could become overnight a $100 billion company, by market capitalization, raising $10 billion in the process. There's every possibility that investors are preparing for this earthshaking event. Google's struggles provide an ideal excuse for them to trim their Google positions to prepare to move into Facebook.
Facebook shares will be prices at a premium, given that the company probably isn't planning on selling very much of itself in its IPO, continuing a recent trend of tech companies limiting the initial "float" of shares to command a higher valuation.
So Google is under pressure at almost the same time that Facebook is poised to capture investor attention and shift the tech world decisively toward a more social, less search-driven model. Web and mobile users are spending their time on these sites and with their apps, so this is where the action is. The big question is whether they'll be able to make money off advertising in the same bountiful way that Google has from search.