“Wall Street, which forced Google, the Internet search engine, to lower the price of its shares sharply in its initial public offering in August, has decided that the company is worth a lot more today than it was then,” writes Saul Hansell in today’s Wall Street Journal.

“Research analysts associated with five of the investment banks that managed Google’s offering released their first reports on the company yesterday, at the end of a government-mandated quiet period.”

“The analysts were bullish on Google’s shares, which closed at $118.26 on Monday. The shares jumped yesterday to $126.86, up 7.3 percent.”

“Mary Meeker, the Internet analyst at Morgan Stanley, the lead underwriter in the offering, published a model that valued Google shares at $132 each.”

“Heath Terry, the analyst for Credit Suisse First Boston, the No. 2 underwriter, had a target price of $145.”

“The numbers are more than 50 percent above the $85 a share for Google’s public offering on Aug. 17. Google had initially proposed selling shares at $108 to $135. But after what appeared to be light demand in the unusual auction Google designed for itself, the price was lowered sharply.”

“Mr. Terry of Credit Suisse said the gap was not as big as it might appear. Shares of other Internet companies, like Yahoo and eBay, fell in August as investors worried that the rapid growth of the Internet was slowing. Now growth appears to be accelerating, especially for text advertisements on search engines – Google’s main source of revenue. And the shares of Google and Yahoo, its rival in search advertising, have rebounded largely in lock step.”

” ‘Google’s performance since the I.P.O. and Yahoo’s performance have not been that different,’ Mr. Terry said. ‘The big change is that the market is now taking a different view on the space than it did in August.’ “

“When it released its second-quarter results, Yahoo led analysts to believe that its advertising revenues would not increase in the third quarter, but Mr. Terry said that it now appeared that Yahoo and Google would post healthy sales increases.”

“In many ways, Google’s situation today resembles that of Internet offerings of a few years ago – a stock rises sharply after its initial sale, and the analysts, in their first reports on its outlook, say that it can go higher.”

“To be sure, some investors have grown weary of cheerleading reports from brokerage firms that earn more money from investment banking fees these days than from commissions from investors. And many start-ups that soared in the market and then swooned turned out to have been promoted in public by analysts who in private expressed doubts.”

“Most companies relish bullish words from Wall Street analysts and indeed expect them from their underwriters, but the sharp reversal in Google’s share price can only help fuel recriminations between the company and its bankers.”