Yahoo! (YHOO) to outperform Google (GOOG) in 2010

Yahoo's stock

is on track to outperform Google's

this calendar year - the first time that's happened since 2008 when both stocks dropped 40+ percent. That's not to say either company has fared well in 2010, though. Yahoo's up just 1 percent since Jan. 1, and Google's down 4.5 percent. Google's tumble comes on the heels of the company's decision to pull operations out of China after hackers targeted the Gmail accounts of political activists in the country. Google pointed fingers at the Chinese government, and the company decided they were willing to forgo profits for the safety of activists in the country. Still, it seems to me that investors have unfairly punished Google. Google's got so much great technology in the pipeline or already on the market that search is increasingly becoming a smaller piece of the company's earnings pie. Android is on more phones than you can keep track of, and test versions of Google's operating system for laptops and desktops will be launching in "pilot" mode soon. Lest we forget, Google's also one of the leaders in Web-based applications like Google Docs - a cloud-based suite of Microsoft Office-like

programs that allows users to collaborate and build documents online. Yahoo! on the other hand seems to be floundering in the innovation department. A partnership with Microsoft's Bing Search Engine could help the company's bottom line eventually, but Yahoo's forays into mobile seem ho-hum compared to Google's head-first plunge. I'm convinced Google's stock will catch up with the company's ideas soon, and some analysts appear to agree. On Tuesday, Morgan Stanley

raised their price target on Google shares to $730 in a research note to clients. That's nearly 25 percent above the stock's current levels, and I'd wager it could hit $730 in 2011. At some point, investors will realize that China isn't the only market that matters, and that will be good news for the Google bulls.