Google stock is at an all-time high, but many of the big tech companies are not showing the gains they are showing on the market.
In fact, Google shares are down 0.6 per cent over the past year, the biggest one-day drop in the S&P 500 over that period.
The news comes after the search engine giant posted its biggest quarterly profit since 2006.
Google stock has risen more than 11 per cent in the past five years, but has also been hit hard by the government’s data protection and privacy legislation.
As the company tries to regain the trust of investors, a new report says it is not yet clear how much it can regain.
“There is some uncertainty around the company’s ability to make a meaningful return,” the report from Morgan Stanley says.
“It’s possible that a turnaround of the company is not feasible for at least a year, which could put downward pressure on Google’s EPS.”
The report says Google’s shares have risen just 1 per cent on a year-on-year basis since March.
While investors are excited about the company, many analysts are sceptical about the tech giant’s prospects.
Google’s recent share price rise is a positive sign, says analyst at Morgan Stanley Ian Bresnahan, who expects the company to see a rebound this year.
“But this is only a start,” he says.
Mr Bressons worries are partly due to the privacy issues the US government is expected to introduce.
“In addition to its legal problems, Google is facing its biggest threat in its search advertising business as well, and there are a number of concerns about how it will address privacy,” he said.
“Its stock will fall and the stock could even fall below $100.”
The Morgan Stanley report suggests Google will have to focus more on mobile and online advertising.
The US government has proposed changes to the way it classifies information.
The move could mean Google would be required to share information about the search history of people with a specific Google account and not the entire user history.
The company’s recent quarterly results also showed it had struggled to regain trust among its investors.
“The stock has been hurt by the US Government’s proposal to reclassify user data as government information,” Mr Breshan said.
Google said it had received more than 2.4 million requests from US government authorities, including the Department of Justice, the Federal Bureau of Investigation and the Securities and Exchange Commission.
“These requests are a major part of the reason for Google’s performance and have led to significant growth in user and ad revenue,” a Google spokesperson said.
The report does not say whether the US data collection proposal is still in the pipeline, but Google is likely to face more pressure to comply with the rules.
“If Google fails to comply, the government could potentially impose an effective fine of up to $5 million per day,” the Morgan Stanley analysts said.