Alphabet’s Horsepower Running Strong After Divvying Healthy Growth
Cantor analyst Kip Paulson is crooning accolades for Alphabet Inc (NASDAQ:GOOGL) on back of yesterday evening’s sound second-quarter print that exhibited meaningful growth. In particular, the analyst gives kudos to the tech titan’s three crucial drivers: a three-part punch of mobile search, YouTube, and the company’s programmatic segment.
Just like the past few rounds, mobile search was the best of Alphabet’s assets. In fact, the GOOGL team went as far as to call its performance “tremendous,” carried on a stellar tidal wave from both YouTube and programmatic alike. Overlooking the fourth quarter of 2015, yesterday’s print marks the “first quarter of double-digit growth for the network business since 1Q13.” Network surged ahead 13% year-over-year to $4,247 million, a nice rise compared to the 9% growth in the first quarter, which Paulson attributes to programmatic and AdMob, Google’s mobile advertising platform designed for mobile apps.
Noting that “all regions displayed very healthy growth,” the analyst reiterates an Overweight rating on shares of GOOGL while hiking the price target from $1,070 to $1,100, which represents a 13% increase from where the stock is currently trading. (To watch Paulson’s track record, click here.)
Alphabet “[…] featured another quarter of sustained underlying momentum and broad-based global strength. Similar to previous quarters, management highlighted ‘tremendous’ growth in mobile search, ongoing strength from YouTube and programmatic, and substantial growth in other revenues from Cloud, Play, and hardware. Although TAC was a bit higher than expected due to strong growth in higher TAC areas (mobile and programmatic), we believe faster top-line growth will offset slightly lower gross margins over time. Continuation of healthy double-digit growth (amid the secular shift to digital/mobile advertising), attractive FCF and EBITDA margins (despite higher TAC and investments), disciplined capital allocation, and a compelling valuation (13.3x EV/EBITDA) keep us positive on the name,” surmises Paulson.
TipRanks analytics reveal GOOGL as a Strong Buy. Based on 28 analysts polled by TipRanks in the last 3 months, 24 rate a Buy on Alphabet stock while 4 maintain a Hold. The 12-month average price target stands at $1,082.71, marking an 8% upside from where the stock is currently trading.
Amazon Ignites Growth Prospects with New Whole Foods Era
Amazon.com, Inc. (NASDAQ:AMZN) is in great shape following its Whole Foods deal, and top analyst Michael Olson at Piper Jaffray is adding revenue into his expectations looking ahead to the fourth quarter of the year. Margin expansion for the back half of the year has the analyst backing Amazon’s path to success. Additionally, the analyst’s Amazon Search Index shows that unit growth for the second quarter should be 24%, which sets the tone for a “solid” performance come this Thursday.
Therefore, the analyst reiterates an Overweight rating on AMZN with a price target of $1,200, which represents a close to 16% increase from current levels.
Olson comments, “[…] we believe that WFM will accelerate Amazon’s pursuit of grocery delivery and other fulfillment methods, which will necessitate a significant distribution buildout. As such, we are lowering our 1H’18 GAAP op margin estimate from 5.0% to 3.7% (vs. Street at 4.1%). While we think this is the right decision for shareholder value, it creates near-term margin headwinds.”
“We are updating the structure of our model for the WFM acquisition and to better reflect Amazon’s new reporting segments, while we are also now including more conservatism around investment spend related to fulfillment center buildouts for Amazon Fresh and other grocery-related investments as Amazon ignites its combined go-to-market strategy with WFM,” contends the analyst, confident on Amazon’s future looking at robust growth.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top analyst Michael Olson has achieved a high ranking of #59 out of 4,608 analysts. Olson upholds a 69% success rate and garners 17.9% in his annual returns. When recommending AMZN, Olson gains 16.7% in average profits on the stock.
TipRanks analytics demonstrate AMZN as a Strong Buy. Out of 28 analysts polled by TipRanks in the last 3 months, 26 are bullish on Alphabet stock while 2 remain sidelined. With a return potential of nearly 10%, the stock’s consensus target price stands at $1,140.17.