Alphabet (GOOGL) Stock: $1,300 Here We Come


Google parent Alphabet (NASDAQ:GOOGL) has realized steady growth and this trend shows no sign of ending. Following the announcement of Q2 earnings yesterday, GOOGL stock reached all-time highs, jumping nearly 4% in pre-market trading today. The multinational conglomerate has outpaced the Street’s expectations many times, and last quarter, it did so in dominant fashion.

GBH Insights analyst Daniel Ives is just one of the many bulls charging into Alphabet. GOOGL showcased its superiority as its Q2 revenues, EPS, and traffic acquisition costs (TAC) all exceeded the expectations of both the consensus and even guidance. Though the company ran into a bit of a barrier with the EU fine, no other factors had a major adverse effect on the holdings giant. As YouTube advertising and Google search growth show promise, Ives maintains his Highly Attractive rating and $1,300 price target for the stock.

Throughout nearly all of Q2, Alphabet was thriving. GOOGL prospered both in revenue generation and in EPS, beating Wall Street’s estimates by $450 million and $2.11, respectively. The only time Wall Street overestimated in Q2 was for TAC, which exceeded real costs by $190 million, marking a huge win for Alphabet. Granted, all of these numbers exclude the one bump in the road that did slow down GOOGL: the EU fine. This $5 billion fine was ordered by the European Commission for the company’s alleged reducing product competition by forcing its apps upon smartphone users. Despite the fine and the bad publicity, Alphabet still managed to surpass all consensus predictions and boast its advertising success.

GOOGL was a bit wary of regulations following the Facebook/Cambridge scandal, but fortunately YouTube avoided any trouble and nonetheless generated consensus-beating advertising revenues. Confident with performance, Ives explains that “Q2 advertising and ‘bread and butter’ search revenues were healthy and a good barometer of potential strength heading into the rest of 2018/2019.” The analyst maintains that YouTube ad revenues remain Alphabet’s “crown jewel” and could provide the company significant momentum for more than a year to come.

In the future, the multinational conglomerate will continue trying to decrease TAC, “as mobile advertising impression success remains a key going forward,” states Ives. The analyst emphasizes, though, that Alphabet’s primary focus will be on the GDPR’s constantly evolving regulatory conditions to avoid any fundamental damage from its new data/privacy legislation.

When push comes to shove, because of its “good enough” Q2 earnings and remaining potential for growth, GOOGL retains an Outperform rating from Ives with price target of $1,300. (To watch Ives’ track record, click here)

TipRanks suggests a very similar consensus on the internet giant’s stock. Of the 29 analysts polled in the last three months, 27 rate GOOGL a Buy, while only 2 issue a Hold. With a 12-month average price target of $1,370.42, the Strong Buy exhibits upside potential of 13% from current levels.

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