San Francisco — With widespread reports of losses for technology stocks, once high-flying shares of Google Inc., owner of the world’s most popular search engine, tumbled to a two-year low Monday, dropping below $400 on the Nasdaq for the first time amid concerns that slowing U.S. and European economies will curb sales growth.
By midday Monday, as the broader market slumped as the global credit crisis continued to claim victims in Europe and the U.S., and after the House defeated a proposed financial bailout package, the search giant’s stock was trading as low as $395.34, its lowest point since September 2006.
Analysts are apprehensive that the Internet giant, whose main source of revenue is advertising — AdWords is Google’s flagship advertising product and main source of revenue, $16.4 billion in 2007 — will suffer form the general economic malaise.
“We believe the economic weakness, if it persists, will have to impact Google,” wrote Jason Avilio, a Kaufman Bros analyst, in a note to client on Friday. “We are taking down our revenue estimates for the back half of 2008 and 2009.”
On Friday, a Kaufman Bros. analyst trimmed his estimates for the advertising-dependent company’s sales and profit for the rest of this year and next year.
The third-quarter outlook for the U.S. and the U.K., the company’s two biggest markets, “appears soft,” Marianne Wolk, an analyst with Susquehanna Financial Group LLLP, wrote in a note to clients Monday, though “not too far off prior estimates.”
That is forcing advertisers to cut budgets, she said.
The New York-based analyst slashed her 2008 net sales estimate by 1 percent to $16.1 billion and her 2009 projection by 2 percent to $20.6 billion. Still, the company has strong prospects ahead, said Work, who expects the shares to reach $635 within a year.
Avilio decreased his revenue estimate for Google’s current third quarter to $4.03 billion from $4.7 billion and his profit estimate to $4.65 a share from $4.73 a share. For 2009, Avilio reduced his revenue projections to $19 billion from $19.7 billion and his profit estimate to $22.17 a share from $23.88 a share.
The reduced projections come less than a year after the Internet giant’s stock reached an all-time peak amid analysts’ predictions that the stock would reach a whopping $850.
Google shares have fallen more than 40 percent this year, signaling that search-engine advertising is not immune to the economic slowdown and the crisis on Wall Street. Clients in the European financial industry also have “dropped sharply,” Wolk said. Search ads account for about 99 percent of Google’s sales.
Stocks began to plunge even before the 228-205 vote to reject the bill was announced on the House floor.
But Google is not the only tech stock to suffer a gloomy Monday. Apple, another Silicon Valley giant, took a major beating with its stock, falling a record 18 percent by midday trading.
Google’s stock had peaked near the $750 mark last November, before a sharp sell-off in tech stocks began.
Mountain View-based Google closed the day at $381 after closing Friday at $431.04.