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It's nice to see a couple of brave voices suggesting that Google, which has climbed by almost 400 per cent since it went public less than 18 months ago, might be a little overvalued -- or at least “fully valued,” as analysts like to say when they're trying to be cautious. Are they right? That remains to be seen. But it's difficult to feel comfortable with a stock (particularly one with such a short track record) when almost every analyst that covers it has a “buy” rating. Small companies can grow as quickly as Google has and not hit any speed bumps or potholes, but a company that goes almost straight up from a market value of about $22-billion to one of almost $130-billion is doing the equivalent of driving an ocean freighter at the speed of sound. Bumps are inevitable.

When analysts are uniformly bullish, many investors take it as a contrary indicator -- and they are probably right to do so. Such an atmosphere suggests that whatever weaknesses or risks there might be (and they almost always exist) are being either ignored or glossed over. Could Google be the Web equivalent of Wal-Mart, which went from being a small, regional retailer to the biggest company on the entire planet? Sure it could. But it's unlikely to get there in two years when it took Wal-Mart two decades. The Internet is fast, but it's not quite that fast. And that's why it might be handy to know about some of the potential speed bumps in advance.

Until recently, the only analyst who could be termed a Google “bear” was Philip Remek of Guzman & Co., who has had a “sell” rating on the shares for some time now, and says they are worth about $260 (U.S.). That puts him at the far end of a price-target spectrum that extends all the way to about $2,000 -- a theoretical price arrived at by Caris & Co. analyst Mark Stahlman recently (although he took pains to note that it wasn't an official target). At the moment, the search engine company's stock is over $450, and most analysts have targets of between $500 and $600.

Two other analysts joined the bearish camp this week: Scott Kessler of Standard & Poor's Equity Research and Scott Devitt of Stifel Nicolaus, who have both downgraded it to a sell. Not quite bears but leaning towards the bear-ish are Stanford Institutional Equity analyst Clayton Moran, who has cut the stock to “hold” from “buy,” and Merrill Lynch's Lauren Rich Fine, who rates the shares “neutral” but recently said in a research note that she is becoming more “anxious” about the risk-reward ratio.

Interestingly enough, there have also been bearish comments by Henry Blodget, the former Merrill Lynch analyst who was drummed out of the industry after he got caught up in an investigation by New York Attorney-General Eliot Spitzer into the role that bullish brokerage firms played in the tech bubble. Mr. Blodget now writes a blog called Internet Outsider, and has written several times about Google's stock (although a disclaimer on the site notes that this is not to be considered investment advice, since he is prevented by a settlement from doing so). More than one market watcher has said that it seems a little ironic for Mr. Blodget -- who rose to fame for putting a bullish $400 target on Amazon.com in 1998 -- to be making the bearish case on today's hottest tech stock.

In any case, Mr. Blodget and the other bears who have come creeping out of the woods all make a similar central point, which is that Google's business depends almost entirely on advertising, in the sense that ads generate almost 100 per cent of the company's revenue -- through keyword-based ads that appear both on its own websites and those of its search partners (such as AOL), as well as any website that takes part in Google's AdWords program. And with a stock price that is trading at almost 50 times even bullish profit estimates, and almost 25 times the company's sales per share (Yahoo is at 10 times), the market is expecting Google to continue its incredible growth for several years at least. What if that growth begins to slow -- even a little -- as it has for eBay, Yahoo, Amazon and other more mature technology leaders?

What could cause that kind of slowdown? It could be as simple as an economic slowdown, or it could be the effects of increasing competition from Microsoft and Yahoo -- or it could be a bit of both. Google's critics also note that the search company could be hit by a backlash as a result of what is called "click fraud," which is a problem not just for Google but for the entire Web search industry. Broadly speaking, it involves unscrupulous companies either clicking on ads in order to get affiliate fees for driving traffic to a particular site, or clicking on their competitors' ads in order to drive their costs up. The impact of that kind of activity, some analysts suggest, is that in the future, advertisers might be willing to pay less for keyword ads because they don't know how much of the traffic they are seeing from them is a result of fraudulent clicks.

In any case, Mr. Blodget -- who is no doubt intimately familiar with what can happen to over-valued stocks -- points out that it's not even necessary that Google see a huge drop in the growth rate of its revenue or cash flow for the stock to fall. All that is required is for investors to decide that 25 times sales is too much, and that a smaller multiple would be more appropriate. The combination of slower growth and a smaller multiple can hit a stock hard, as Amazon has found out. It isn't that the company stopped growing -- just that it stopped growing quite as quickly.

Is any of that going to happen? No one really knows. But at the moment, Google's stock is priced for perfection -- anything less will likely be seen as a disappointment. And that could have unpredictable consequences.