A Google climb to $900 would face headwinds

Google’s high-flying stock received another shot in the arm Tuesday when an analyst increased his price target to $900, the highest among all major investment banking firms.

The upgrade by Credit Suisse analyst Heath Terry helped push Google’s shares up 3.6 percent, or $22.69, to end trading on the Nasdaq stock market at $648.54. The shares edged another $1.96 higher in after-market trading, to $650.50.

But Google’s stock may face headwinds as the U.S. economy slows and advertising revenues falter, analysts say. Scrutiny of Google’s bid to buy Internet advertising agency DoubleClick by the Federal Trade Commission could also hurt the company’s shares.

Henry Blodget, famous for his analysis of Internet companies at investment banking firm Merrill Lynch ahead of the dot-com bust in 2000, wrote that economic weakness caused by the housing slump in the United States will ultimately cut into online advertising revenue at companies such as Google and Yahoo.

Blodget, currently president of analysis and consulting firm Cherry Hill Research, points to several signs the United States may already be in a recession, including weak October advertising revenue at the New York Times.

In fact, the entire newspaper industry is already suffering from fallout of the subprime mortgage crisis in the United States, which is causing people to place fewer real estate ads in the classifieds. Advertising overall at U.S. newspapers fell 7.4 percent year-over-year in the third quarter, according to the Newspaper Association of America, led by a 24.4 percent decline in real estate ads.

Separately, The Wall Street Journal poked fun at analysts who cover Google on its blog, saying they appear to be playing a game of one-upmanship to see who can come up with the highest price target.

Credit Suisse is in first place now, while three other firms are vying for second with $850 price targets on Google.

Controversy over Google’s $3.1 billion offer to buy DoubleClick could also hurt its shares. The Internet search giant was expected to benefit from DoubleClick’s network of advertisers and Web publishers, as well as its technology for banner, graphical, and video advertising, which aren’t Google’s specialties. Most of Google’s ad revenue comes from text ads that appear after Web searches and link to advertiser’s Web sites.

The DoubleClick deal has faced opposition all year, and more recently from the U.S. Senate’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, along with the European Commission (EC), which last week said it planned to investigate whether or not the purchase will hurt competition in online advertising in Europe.

Two senators on Monday sent a letter to the chairman of the Federal Trade Commission asking it to scrutinize competition and consumer privacy concerns raised in hearings held by the subcommittee.

A combination of Google and DoubleClick could create “a powerful Internet conglomerate able to extend its market power in one market into adjacent markets, to the detriment of competition and consumers,” the senators warned. They added that Google’s ability to track search requests by individual users and DoubleClick’s collection of user data to target ads to them “raises fundamental consumer privacy concerns worthy of serious scrutiny.”

Such attention-grabbing remarks are unlikely to help boost Google’s stock.