* Revenue surge prompts rethink from analysts on price targets
At least 16 brokerages raise share price targets to as high as $1,220
(Adds analysts' comments, details on valuation)
By Soham Chatterjee and Alexei Oreskovic
SAN FRANCISCO, Oct 18 (Reuters) - Google Inc shares jumped past $1,000 on Friday as investors bet on the Internet company's continued dominance of the mobile and video advertising businesses despite aggressive competition from Facebook Inc and Yahoo Inc.
Shares of the world's No. 1 search company rose more than 13 percent to hit an all-time high of $1,008.18, swelling the company's market value by almost $40 billion. That vaulted Google past Microsoft Corp and Berkshire Hathaway Inc in capitalization and brought it to No. 3 among U.S. companies, behind only Apple Inc and Exxon Mobil Corp .
Google, which is also known for its Google Maps service, Chrome browser and Nexus line of smartphones and tablets, on Thursday reported a 23 percent jump in net revenue from its Internet business. Advertising volume soared 26 percent - the highest rate of growth in the past year - and more than made up for an 8 percent slide in ad prices.
But given concerns about how U.S. companies can increase revenue in an uncertain global economy, those numbers suggested Google was firing on all cylinders except for its perennially money-losing Motorola unit, analysts said.
"Google's ownership of the Android ecosystem makes Google like the house, in Vegas terms," said Stifel Nicolaus analyst Jordan Rohan. "The success of Android, which becomes more and more popular every day, is starting to really add up, and Google is collecting small tolls along the way."
Rohan said accelerating revenue growth outside the United States and the UK was impressive, particularly in South Korea and Japan. "That could go on a while," he said.
At least 16 brokerages raised their price targets on the stock to between $880 and $1,220. The shares traded at $1,006.44 on Nasdaq at midday.
"We view solid paid clicks growth to be a good indicator of demand, driven by the continued shift to mobile," JPMorgan analysts said. They had expected 21.5 percent growth in ad volumes.
A STUDY IN CONTRASTS
Google's Friday rally also stemmed from investors' focus on Facebook and its own increasingly successful efforts to sell advertising on mobile devices. Google stock had gained just 26 percent this year, while Facebook's has almost doubled.
"The worst is behind Google from a sentiment perspective," Deutsche Bank analysts said.
Google and Facebook, which is expected to report its third-quarter results on Oct. 30, also stand head-and-shoulders above the likes of Yahoo. The once-dominant Internet portal this week reported a tepid quarter, losing market share in display and search advertising.
Facebook rose 3.6 percent to $54.08 on Friday, while Yahoo was up 2 percent at $33.40. Baidu Inc, often called China's Google, gained 7.1 percent to $164.78.
Google's rally has already rewarded investors such as Fidelity Investments' $101 billion Contrafund.
Contrafund added to its stake in Google in the third quarter and got a big lift from the surging performance of Facebook and Tesla Motors Inc as well. The fund returned 8.94 percent in the third quarter, easily beating the 5.24 percent advance of the Standard & Poor's 500 stock index.
Some say Google still has room for improvement. JPMorgan analysts said continued efforts to counter declines in ad rates might yield a major opportunity in the upcoming holiday season.
Google earlier this year rolled out a service to help advertisers promote their products on a mix of smartphones, tablets and desktops. The move is also expected to bolster Google's overall advertising rates by mitigating the impact of mobile ads, which command lower rates.
Others say YouTube, the world's most popular video website, is still not fully tapped. Ads on the site increased more than 75 percent in the quarter from a year earlier, with 40 percent of traffic now coming from mobile devices.
"We estimate that Google's key YouTube asset generated approximately $4 billion in revenue in 2012, positioning Google extremely well for the strong growth in video advertising," RBC Capital Markets analysts wrote in a note.
Analysts at Jefferies said Google was among the companies best positioned to benefit in mobile, given the 1 billion mobile devices running its Android software. The Mountain View, California-based company sells applications and content through its Google Play Store.
(Editing by Edwin Chan, Sriraj Kalluvila and Lisa Von Ahn)