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Alphabet ( GOOGL ), the parent of search leader Google, got a ratings upgrade and price target boost on Monday from Pivotal Research, which said it expects foreign-exchange headwinds to calm. Pivotal upgraded Alphabet stock to buy from hold, as well as hiking its price target to 970 from 800. Alphabet stock was up a fraction in afternoon trading in the stock market today , near 765. Alphabet reports Q1 earnings on April 21. Pivotal analyst Brian Wieser wrote in a research report Monday that he estimates Alphabet will log 16% revenue growth year over year in Q1, or 18% revenue growth excluding traffic acquisition costs — the fees Google pays to other companies to carry its ads. Alphabet’s dominant position in digital advertising alongside Facebook ( FB ) “is fundamentally unchanged, and we continue to expect Google to sustain double-digit growth rates in advertising on an ongoing basis,” wrote Wieser. The same factors that led to Alphabet’s growth in Q4 will continue, he said, including revenue from Google video wing YouTube and programmatic display-related ads. Wieser said he is watching display ad revenue because that growing share of Alphabet’s overall revenue mix is generally less profitable than search ads, “largely because of the needs to continually innovate on related products and provide service and marketing support to those products.” Programmatic advertising, for example, “does not eliminate the need for costly humans in the process of trading media, but instead requires different humans to manage these businesses,” he wrote. “This issue is exacerbated with YouTube, where content delivery and capital costs are even higher, and content costs are now a factor that both drives growth, but also constrains profitability.” Alphabet’s non-core, or “Other Bets,” are “likely to continue dragging on Alphabet overall , although at least their scale is relatively minimal overall,” said Wieser. For example, Nest, the smart home device maker Google bought for $3.2 billion in 2014 to compete with Apple ( AAPL ) in that growing market, is falling short of expectations, news site Re/Code reported last month. ITG Investment Research analyst Steve Weinstein, said in an industry note Monday he expects to see Alphabet post revenue of roughly $2 billion for “Google other” and $150 million for “Other Bets” for Q1, with total gross revenue coming in at roughly $20.57 billion, slightly ahead of consensus of $20.3 billion. Scalper1 News
Scalper1 News