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Google's stock (GOOG) is down 3.1% as I write this, in reaction to the company's admission that it mistakenly disclosed an internal full year revenue projection of $9.5 billion and a prediction that its AdSense business would come under increasing competitive pressure in 2006. (Full text of Google's filing.)

It's logical that the stock should be down in response to the revenue projection.
The $9.5 billion revenue number is consistent with consensus analyst estimates. Nobody owns Google stock because they think it will meet estimates; they own it on the assumption that Google will crush estimates. This is a growth stock; and you own growth stocks for their growth, not their value based on consensus predicted earnings.

But why should the market react badly to Google's admission that it expects to lose market share? Anyone following YHOO knows that it's about to launch competitive products to Google's. Yahoo emailed potential customers of its Yahoo Publisher Network as far back as May 2005. And in the discussion of its Q4 results as recently as January 17th, Yahoo explicitly outlined its plans to launch a competitor to AdSense, including the timing. (They're in the full text of Yahoo's Q4 Conference Call transcript.) Some sell-side analysts have become increasingly bearish on Google based on these data points. Look at Scott Devitt's argument that YHOO is better value than GOOG, for example.

All of which leads to a single conclusion: If people are still expecting Google to beat numbers, and they're not pricing in news that has been public for months and explicitly stated on conference calls, the stock may still be too frothy.

Source: Google AdSense Competition: What's Priced-In? (GOOG)