Is Alphabet (GOOGL) Set to ‘Prove’ Itself in 2018? GBH Likes the Bullish Odds

GBH's Daniel Ives says Google's search business' ad growth should impress in 1Q results, even amid mounting Street concerns.


Alphabet Inc (NASDAQ:GOOGL) did not deliver its strongest financial performance in its fourth quarter print, where Other Revenues took a downturn in growth. Anticipation is high as the tech titan unleashes its first quarter showcase once the bell tolls, and GBH Insights analyst Daniel Ives calls it as he sees it: this company “has a major ‘prove me’ quarter ahead.”

Ives acknowledges “recent noise on the Street” with the fourth quarter results, fundamental challenges, and regulatory concerns hovering like a dark cloud over GOOGL shares. That said, the analyst’s Tech Tracker points to encouraging trends in both mobile search to advertising throughout the first quarter, which could lead to the chance of a slight beat tonight. In fact, Ives likewise bets the 2018 guide could also outclass Street estimates.

In an upbeat earnings preview, the analyst reiterates a Highly Attractive rating on GOOGL stock with a $1,280 price target, which implies a just under 19% upside from where the shares last closed. (To watch Ives’ track record, click here)

“We believe relative strength from Google’s bread and butter search business should be a catalyst in 1Q, as ad growth was the ‘star of the show’ this quarter despite recent noise on the Street. We are also seeing accelerating ad momentum from search and YouTube heading into the rest of 2018 despite the recent ad speed bump seen in the field. TAC trends will again be a focus this quarter, as mobile advertising impression success remains a key going forward for Google in this very competitive land grab market opportunity. Overall, we believe solid 1Q earnings and strong enough 2018 guidance […] could be a positive catalyst for shares with much fuel left in the growth tank in our opinion. The big lingering question is around the treacherous regulatory landscape that could be on horizon for Google, as the combination of the negative impact from the Cambridge debacle with Facebook and heightened GDPR standards on the near-term horizon will be front and center for the Street next week,” Ives contends.

Ultimately, mobile search, YouTube, and advertising strength continue to be leading drivers of growth and monetization for the company, with Ives spotlighting “clear headwinds” this year. An important measurement of success down the line for Google will be traffic-acquisitions costs (TAC), adds Ives, who believes this will be a significant piece of the puzzle looking ahead. After all, the analyst believes mobile advertising impression momentum opens the doors to the ad “kingdom.” Even with regulatory and ad growth concerns flying, the analyst sees a bigger picture growth narrative for the tech titan this year that to put it simply remains “compelling.”

TipRanks showcases this tech empire as a strong bullish favorite on Wall Street. Out of 27 analysts polled in the last 3 months, a robust majority of 25 rate a Buy on GOOGL stock with only 2 maintaining a Hold. With a solid return potential of 21%, the stock’s consensus target price stands at $1,306.00.

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