Three years of Google stock gains erased

Search giant shares at lowest level since 2005 as analyst cut forecasts

On Wall Street, they call it a round trip, and Google's stock just took one lasting three years.

Shares of the search giant fell through the $300 mark today for the first time since October, 2005, showing that even highly-profitable tech firms aren't immune to the panic gripping the stock market.

The latest leg down came after at least two Wall Street analysts, including our frequent guest, Mark Mahaney, cut their fourth-quarter earnings estimates for the company.

Mahaney's note says he checked with more than two dozen buyers of search advertising and found that "search marketers almost universally expect Q4 to be the weakest they've ever experienced."

The analyst barely trimmed his full-year earnings estimate and still expects Google to earn more than $19 a share for 2008, roughly in line with the Wall Street consensus view.

Google has now lost more than half its value this year as investors worry that online advertising will get hit along with the rest of the economy. Estimates for online ad growth have been trimmed several times this year.

The irony of the stock drop is that search advertising is getting an ever bigger share of the ad pie, and Google has been extending its dominant share of the market.  

But that's no help when large banks start disappearing and people start worrying that the entire global economic order is in order.

Or, as Mahaney put it in his note, "unprecedented macro trumps all."

The stock market is a leading indicator, and until investors no longer fear a worst-case scenario for online ads next year, Google bulls might be hard-pressed to rally the stock.

Google executives, who give no financial guidance, meanwhile, keep spending money on a wide range of initiatives, from clean tech to the Android mobile operating system.

CEO Eric Schmidt has said he expects the mobile search business to surpass the company's desktop business in the future.

All of which means that investors who still believe in Google's growth and who've been kicking themselves for missing out as Google went from $300 to $700 now have a chance to buy it at a level they might have thought they'd not see again.

As they mull that option amid the market chaos, they may want to keep in mind another Wall Street maxim: be careful when trying to catch a falling knife.