Analyst Youssef Squali of SunTrust believes Alphabet Inc (NASDAQ:GOOGL) is quickly expanding beyond its traditional role as the worlds top internet search engine. In his initiation report, the analyst sees the company moving into a number of fields such as Cloud computing, Internet of Things (IoTs), self-driving cars and Display/Video ad businesses, which enable the tech giant to collect and analyze users in ways once thought unimaginable.
Squali notes that Google is still preforming very strongly on the advertising end and has maintained double digit growth in search ad spends, which the analyst believes accounts for around 50% of its digital advertising. Up 13% year-over-year, totaling for 75% global Search ad spend, the analyst estimates Google netted around $63 billion in Search ad revenues in 2016.
Furthermore, with around 1 billion monthly average users between Android, Maps, Chrome, YouTube, Google Play, and Gmail the company can “Serve the most relevant ads at any given time on any property, in any geography […] Given the highly targeted nature of Search, where it fits in the marketing funnel and track-ability of its ROI, we believe it’ll remain a pillar of marketers’ ad budgets for years to come” says Squali. The company is also leading in non-search ads like Maps and Waze, which the analyst notes “GOOGL only begun monetizing.”
According to Squali, another up and coming Google money-maker is in its Display/Video ad businesses, which raked in gross revenue of near $16 billion in 2016 and is outpacing the market by 200% and is up 40% year over year. Overall Google is giving stakeholders access “to some of the fastest growing and most exciting trends within the global economy at an attractive valuation, in our view […] That said, decelerating growth, margin pressures and regulatory concerns in the short/medium-term are important considerations to keep an eye on” opines the analyst.
As such, on the heels of these advances, the analyst initiates a Buy rating on GOOGL stock with a price target of $1,100 representing a 16% rise above current trading levels.
Youssef Squali has an excellent TipRanks score with a 73% success rate and a high ranking of #27 out of 4,627 analysts. Graham realizes 19.6% in his annual returns. When recommending GOOGL, Squali earns 16.9%.
TipRanks analytics showcase GOOGL as a Strong Buy. Out of 34 analysts polled by TipRanks in the last 3 months, 31 are bullish, while 3 are sidelined. With an upside potential of 16%, the stock’s consensus target price stands at $1,098.90.