National Post (National Edition)
Alphabet gets an ‘A’ from Wall St.
Price targets boosted on Q2 results
Alphabet Inc.’s secondquarter earnings beat drew praise on Wall Street as several analysts lifted their price targets. Strong advertising growth, slowing traffic acquisition costs and opportunities in cloud and hardware sales have positioned the company for a strong second half, according to Susquehanna. The shares rose as much as 5.3 per cent to a record high, boosting large-cap tech peers. They ended Monday at US$1,211, and gained another US$47.15, or 3.9 per cent, to close Tuesday at US$1258.15.
SUSQUEHANNA, SHYAM PATIL
Raised price target to a Street-high US$1,500 from US$1,250
“The impressive sites revenue growth acceleration (the key revenue line item) shows the secular momentum for the ads business remains in full-force ... and the cumulative impact of numerous smaller ad optimizations across core search and Youtube appears to be driving noticeable growth and share gains.”
GOLDMAN SACHS, HEATHER BELLINI
Raised price target to US$1,450 from US$1,350, reiterated buy rating
“Revenue upside and moderating growth in traffic acquisition costs (TAC) led to GAAP EPS upside.”
“Unlike last quarter, we believe this quarter will hit on almost all areas, namely, strong topline momentum remains in both its core business but also Google Other revenue accelerated slightly with help from Cloud and hardware.”
RBC CAPITAL, MARK MAHANEY
Raised price target to US$1,400 from US$1,285, reiterated outperform
“Revenue and operating income came in ahead of expectations, with growth remaining extraordinarily consistent, and TAC beginning to moderate.”
“The company’s investments in Cloud, Internetconnected Homes, and Autonomous Vehicles potentially set the company up for more years of premium growth & profits.”
MORGAN STANLEY, BRIAN NOWAK
Raised price target to US$1,325 from US$1,250, maintained overweight
The second quarter “featured first top- and bottomline beat in three quarters” and an accelerating Us $85 billion Websites business, which speaks to Alphabet’s “innovation, user/advertiser focus, and ability to build and monetize” around its user platforms.
PIVOTAL RESEARCH, BRIAN WIESER
Raised price target to US$1,080 from US$1,050, neutral rating
“Beyond ongoing market share gains in digital advertising, we think that relatively easy comparables because of last year’s Youtube advertiser boycott and incremental revenue from GDPR probably helped as well.”
“There do not appear to be any signs that should cause a meaningful slowdown any time soon, as fines from the EC are not likely to hamper Alphabet’s growth rate.”
WELLS FARGO, KEN SENA
Raised price target to US$1,400 from US$1,255, outperform
“TAC expense did moderate, as CFO Ruth Porat said in previous quarters it would, but by even more than anticipated.”
Wells Fargo continues to see Alphabet as attractive in terms of revenue growth, strong cash position and “the traction it appears to be having across numerous business lines outside of Search, including Youtube, Cloud, Waymo, and recently ‘graduated’ companies: Loon and Wing.”
JEFFERIES, BRENT THILL
Raised price target to US$1,450 from US$1,360, maintained buy rating
“Core search remains strong (led by mobile trends), and we continue to see large potential from 4 ‘call options’ (Youtube, Cloud, hardware, Waymo), which should help drive the next” US$100 billion in revenue.
OPPENHEIMER, JASON HELFSTEIN
Raised price target to US$1,450 from US$1,350, maintained outperform
“We see multiple positives” as revenue growth FX remains strong with “no sign of material slowdown in sites/network.”
Oppenheimer also noted “strong qualitative commentary/client wins in Cloud.”
GBH INSIGHTS, DANIEL IVES
“Advertising and ‘bread and butter’ search revenues were healthy and a good barometer of potential strength heading into the rest of 2018/2019.”
“Youtube advertising revenues continues to be a ‘crown jewel’ for the company and a major tailwind heading into the next 12 to 18 months.”
Highly attractive rating, price target US$1,300
LOUP VENTURES, GENE MUNSTER
“AI, for the first time, is starting to have a measurable impact on results, as evidenced by paid clicks up 58 per cent y/y vs. consensus of 49 per cent. This is because AI makes search results more relevant, increasing paid clicks.”
“Our ongoing questions about potential regulation and, more specifically, the impact of the EU’S recent decision were largely unanswered. We see little impact on Google’s core business in the long run.”
BLOOMBERG INTELLIGENCE
“Alphabet sales should continue to benefit from robust growth in mobile search and Youtube, while moderating traffic-acquisition costs (TAC) aid margin” in the second half of the year.
“New ad types in Google Maps and increasing investments in commerce line up longer-term revenue drivers.”
“The impact from GDPR and the Us$5-billion EU fine appears minimal based on forward-looking commentary, yet TAC growth could come from changes that follow the EU antitrust ruling.”