RBC Capital analyst Mark Mahaney weighed in today with a favorable report on Alphabet Inc (NASDAQ:GOOGL), following his recent analysis of the pending segment disclosure and its implications for GOOGL valuation. Shares of Alphabet rose nearly 3% in trading Tuesday evening.
Mahaney commented, “Google’s new segment reporting is expected with Q4 EPS results. We view this as the sector’s most identifiable n-t catalyst because it: A) will highlight the very high profitability of Core Google; B) will likely lead to greater cost transparency – and thus, efficiencies – across Alphabet; C) will probably support a more robust SOP valuation framework – i.e. cause a stock rerating.”
“There’s $1,000+ in GOOGL share price potential post the segment disclosure”, the analyst concluded. “A reasonable Sum-of-Parts valuation approach would apply a range of P/E multiples (17X-25X) to Core Google’s 2017E Operating EPS ($41.00-$52.00, depending on growth & margins) + approximately $7B to capture the Other Bets + the $90B in Net Cash we est. for Alphabet by YE16 (esp. as GOOGL is now buying back shares). The result would likely = GOOGL at $1,000+, based on our analysis.”
Mahaney reiterated an Outperform rating on Alphabet shares, with a price target of $880, which represents a potential upside of 12% from where the stock is currently trading.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Mahaney has a total average return of 23.9% and a 67% success rate. Mahaney has a 36.5% average return when recommending GOOGL, and is ranked #4 out of 3644 analysts.
Out of the 48 analysts polled by TipRanks, 45 rate Alphabet Inc. stock a Buy, while 3 rate the stock a Hold. With a return potential of 4.0%, the stock’s consensus target price stands at $814.80.