Google Inc. shares may surpass $1,000 over the next year as the world's most popular Internet search engine trounces competitors, said Ryan Jacob, manager of the best-performing technology fund.
The Mountain View, California-based company's stock reached $700 on Oct. 31 after rising to $600 earlier in the month. A price of $1,000 would be a 44 percent increase from yesterday's close.
Google is ``taking share from smaller players and consolidating their lead among larger competitors,'' Jacob, who made Google his second-largest holding in his top-performing Jacob Internet Fund, said in an interview yesterday in Boston. ``I don't think $1,000 price targets are a stretch.''
Apart from dominating the market for Internet search, Google this month said it would create a mobile-phone operating system for handsets sold by Sprint Nextel Corp. and T-Mobile USA Inc. The agreement could increase advertising revenue, which accounts for 99 percent of its $10 billion in annual sales.
Google started what it calls the Open Handset Alliance to make free software that will help the phones run applications. Nokia Oyj and Microsoft Corp. have separate phone operating systems that aren't open to developers.
``With its new mobile system, Google is getting out in front,'' Jacob said.
Google fell $20.76, or 3 percent, to $673.08 at 10:35 a.m. New York time in Nasdaq Stock Market trading.
The $80 million Jacob Internet Fund has climbed at an average annual pace of 34 percent over the past five years to rank as the best-performing technology fund, according to Morningstar Inc. in Chicago. Google represents 7.1 percent of its assets.
Google's shares trade at 56 times this year's estimated earnings, making them more than twice as expensive as Microsoft. Jacob said Google's shares aren't too expensive because earnings are growing faster than its stock price.
Google's third-quarter net income rose 46 percent to $1.07 billion as sales advanced 57 percent to $4.23 billion.
Jacob, 38, started the fund in 1999, just months before a three-year rout in technology stocks began. The fund lost 79 percent of its value in 2000, 56 percent in 2001 and 13 percent in 2002.
This year, the fund has risen 11 percent, trailing 92 percent of other technology funds, according to Morningstar. The fund has been hurt by investments in small companies whose shares are deemed cheap compared with earnings, Jacob said.
Among the fund's biggest holdings, Napster Inc., the Los Angeles-based music-download service, has lost 11 percent this year, and Openwave Systems Inc., a Redwood City, California- based maker of communications software, has plunged 63 percent.
The fund's biggest holding is Sohu.com Inc., China's third- biggest Internet portal. Sohu shares have more than doubled this year, as the company has benefited from operating the official Web site for the Beijing Olympics. Jacob holds a quarter of the fund in Chinese stocks, the most he's ever invested in the region. ( Bloomberg )