Top Analyst Bullish on Alphabet (GOOGL) Stock on Back of Accelerating Growth in Mobile Search and YouTube Engagement

Following its earnings release earlier this month, some investors pulled back from Alphabet’s (GOOGL) stock as the company reported its lowest operating margin in a long time. Though revenue and profit exceeded Wall Street expectations, there is growing concern over increasing costs (contributing to lower margins). For example, content acquisition costs in digital advertising and YouTube continue to increasing, which is having a negative impact on profit margins. Furthermore, as Alphabet continues growing its hardware business, margins will continued to be pinched.

Even so, Tigress analyst Ivan Feinseth remains bullish on stock, maintaining his Strong Buy rating.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ivan Feinseth has a yearly average return of 16.4% and a 70% success rate. Feinseth is ranked #92 out of 5,188 analysts.

Feinseth is reiterating his Strong Buy rating “as accelerating growth in mobile search and YouTube engagement continues to drive gains in revenue, cash flow, and Economic Profit.” The analyst says Google “continues to expand its position as the dominant desktop and mobile search engine,” while tremendous opportunity remains in “its emerging technologies including AI and home automation [which] are driving significant revenue growth rates.”

Alphabet is increasingly showings its more than just Search. While still the its overwhelming revenue-generator and its most important business, the company’s “ability to develop greater home automation and mobile connectivity, as well as the ongoing build-out of its cloud computing platform, will continue to drive increasing Economic Profit and greater shareholder value creation.”

Waymo — Alphabet’s self-driving car unit — is frequently touted as the company’s “next big thing.” Feinseth estimates Waymo is valued at $175 billion, which would make it more valuable than Ford Motors, General Motors and Tesla, combined. Waymo has positioned itself as the leader in self-driving car technology, and has even launched a live pilot program in Arizona which was seen as a major step forward for the company. But significant hurdles still remain for the company to live up to its lofty valuation. For example, government regulation is still not where it needs to be for Waymo to operate throughout the entire country. And even if it were, Waymo’s technology is still in the testing phase, and not yet ready for mass production. Finally, once mass-produced, Waymo needs attract passengers to its service — a tough sell, as only a handful of the hundreds of million potential customers in the US have actually rode in an autonomous vehicle.

Operational margin and Waymo long-term challenges aside, Wall Street loves Alphabet. TipRanks analysis of 29 analyst ratings on the stock shows a Strong Buy consensus, with a near-perfect score. 28 analysts recommend Buy, while only one says Hold. The $1,346.62 average price target on the stock represents a 22% upside from current levels. (See GOOGL’s price targets and analyst ratings on TipRanks)

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