Alphabet Inc. (NASDAQ: GOOGL) has been one big tech name that has held up relatively well despite the ongoing COVID-19 pandemic. The company reported first-quarter 2020 results last week, and analysts took this chance to speculate on where Alphabet will go from here. With the worst seemingly over, analysts are taking a positive outlook on the stock.
24/7 Wall St. has included some highlights from the earnings report, as well as what analysts are saying about the stock after the fact.
The search engine behemoth reported adjusted diluted earnings per share (EPS) of $9.87 on revenues of $41.16 billion. In the year-ago quarter, Alphabet posted EPS of $11.90 on revenues of $36.34 billion. Analysts were estimating EPS of $10.33 on revenues of $40.38 billion.
The Google segment posted first-quarter revenues of $24.50 billion, up from $22.55 billion a year ago. Operating income rose from $9.19 billion to $9.27 billion. The operating loss on other (Bets) revenues totaled $1.12 billion, higher than the $868 million loss in the year-ago quarter.
Net income for the quarter totaled $6.84 billion compared with net income of $6.66 billion in the year-ago quarter. In the year-ago quarter, adjusted net income included a $1.7 billion European Commission’s fine.
Google search and other revenue totaled $24.05 billion, up from $22.55 billion in the year-ago quarter. YouTube ad revenues rose from $3.03 billion to $4.04 billion, and revenues from Google Network Properties rose from $5.02 billion to $5.22 billion. Other revenues, including YouTube non-ad revenue, rose from $3.62 billion to $4.44 billion. Overall, revenues rose about 13.3% year over year.
Traffic acquisition costs rose from $6.86 billion to $7.45 billion year over year.
Wedbush reiterated an Outperform rating and raised its price target to $1,550 from $1,375. In its call, Wedbush dove into the earnings report:
The company’s results were largely in line with recently lowered expectations, as analysts had built a slowing advertising environment into models. Revenue was $41.16 billion, compared with our estimate of $41.45 billion, and consensus of $40.29 billion. Non-GAAP operating income (same on a GAAP basis) was $7.98 billion, compared with our estimate of $8.15 billion, and consensus of $7.94 billion. Adjusted EBITDA was $14.28 billion, compared with our estimate of $14.35 billion, and consensus of $14.40 billion. Management noted that while overall performance was strong throughout January – February, advertising revenues experienced a significant and sudden slowdown in March, with a particular pullback across brand advertising. While search activity and YouTube usage have clearly grown in the wake of the pandemic, search has shifted towards less commercial topics and advertising budget declines contributed to meaningful revenue deceleration… Advertising outlook visibility remains limited, but negative trends and potential for macroeconomic revision suggest continued deceleration.
SunTrust reiterated a Buy rating and raised its price target to $1550 from $1350. The firm detailed in its report:
Alphabet continues to be an attractive growth story at a compelling valuation in our view, post a tumultuous first quarter, with a robust Jan/Feb but a challenging March/April due to Covid-19. While Search and Brand ads on YouTube (YT) are currently under pressure, YT and Cloud are bright spots, and so is on-going cost containment and increased operating efficiency. We view the current pandemic as an accelerant to several digitization trends benefiting Alphabet long-term. Tech breakthroughs with Machine Learning and AI should help improve Search, YT and Cloud, affording Alphabet significant expansion in growth/margin and valuation over time.
Here’s what other analysts had to say:
- Baird raised its price target to $1,500 from $1,400.
- Deutsche Bank raised its price target to $1,625 from $1,515.
- JPMorgan reiterated it as Overweight and raised its target to $1,505 from $1,340.
- RBC reiterated it as Outperform and raised its price target to $1,500 from $1,350.
- Barclays reiterated a Buy rating and raised its target price to $1,400 from $1,300.
- BMO Capital Markets reiterated it as Outperform and raised its $1,400 target to $1,550.
- BofA Securities reiterated a Buy rating and raised its $1,372 target to $1,420.
- Cowen raised its target price to $1,525 from $1,450.
- Credit Suisse reiterated an Outperform rating and raised its $1,500 target to $1,600.
- Nomura/Instinet reiterated a Buy rating and raised its price target to $1,700 from $1,680.
- Mizuho reiterated a Buy rating and raised its price target to $1,560 from $1,500.
- MKM Partners raised its target price from $1,400 to $1,500.
- Monness Crespi Hardt raised its price target to $1,420 from $1,350.
- Stifel reiterated a Buy rating and raised its price target to $1,400 from $1,300.
- Susquehanna maintained a Positive rating and cut its $1,800 price target to $1,550.
- UBS reiterated a Buy rating and raised its target price to $1,600 from $1,530.
- Morgan Stanley reiterated it as Overweight and raised its $1,310 price target to $1,400.
Alphabet stock traded at $1,308.17 on Monday, in a 52-week range of $1,008.87 to $1,530.74. The consensus price target is $1,515.73.
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