Google Surpasses Yahoo

Google surpassed Yahoo in stock market capitalization on Monday, as the stock continued its three-day surge on stronger than expected results.

After Monday’s 8.7% gain, investors are now valuing Google at $50.8 billion, more than Yahoo’s $47.9 billion market cap, more than nine of the 30 Dow Industrials, and more than all but about 50 of the S&P 500 stocks.

At $187.40, shares of Google have more than doubled from their $85 IPO price just two months ago.

The surprise in all that is that based on expected 2005 earnings, Google may still be the better value compared to Yahoo.

Yahoo trades at 72 times expected 2005 earnings, while Google trades at 56 times forward estimates, which analysts raised quickly after last week’s blow-out results. Using the crude price-to-earnings growth ratio, Google trades at twice its expected growth rate, while Yahoo trades at more than three times its anticipated growth rate. While neither stock is a bargain at current prices, Google’s faster growth rate appears to make it less overvalued than Yahoo.

Google is a long way from proving itself through thick and thin, but there’s no denying one thing: the company is off to a rousing start.

The broader market slipped Monday, as a chip sector upgrade from Salomon Smith Barney couldn’t overcome weak earnings reports.

The Nasdaq lost 1 to 1914, the S&P 500 fell 1 to 1094, and the Dow dropped 7 to 9750. Volume declined to 1.38 billion shares on the NYSE, and 1.61 billion on the Nasdaq. Advancers led 17-15 on the NYSE, and 16-14 on the Nasdaq. Upside volume was 49% on the NYSE, and 55% on the Nasdaq. New highs-new lows were 100-63 on the NYSE, and 63-86 on the Nasdaq.

After the close, EDS postponed its earnings report until next week. InfoSpace , Western Digital and CSG beat estimates. Nvidia raised guidance. Internet Security and Neoware met estimates. Flextronics , Genesis Microchip , Semtech and Silicon Labs warned. Advanced Fibre beat on earnings but came in light on revenues.

During the day, BellSouth slipped after missing estimates.

Chipmos tumbled 12% on a warning, and United Online and Radware fell on their results.

Nu Horizons jumped 13% on a positive mention in Barron’s.

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