Top Analyst Believes Alphabet (GOOGL) Stock is an “Attractive” Bet Approaching 1Q18 Earnings Show

Following Facebook's data privacy "fiasco," Monness Crespi's Brian White sees a tech titan attractively valued in GOOGL and calls for upside ahead.


Does Alphabet (NASDAQ:GOOGL) stand to benefit from rival Facebook’s data privacy blunder? One of Wall Street’s best performing analysts says yes, commending an “attractive set up” for the tech titan approaching its first quarter financial results for 2018 come Monday.

Top analyst Brian White at Monness Crespi cheers that on the heels of a slew of data privacy apprehensions spurred by Facebook’s Cambridge Analytica mess, “we believe Alphabet is attractive heading into next week’s earnings report.” Meanwhile, look for favorable news flow, wagers White, who highly anticipates Google’s I/O developer conference “on the docket” for the beginning of next month, where developers convene across the globe, diving into the next gen of tech.

Also bullish on the company’s enticing valuation, the analyst reiterates a Buy rating on GOOGL stock with a $1,280 price target, which implies an 18% upside from current levels.

In an upbeat earnings preview, White calls for an outclass on his first quarter revenue expectations of $30.26, which suggest a 22% year-over-year rise, as well as the Street’s $30.32 billion estimate. On EPS, White stands more bullish than the Street’s $9.30 forecast with an estimate of $9.34. Keep in mind, the analyst notes Google wrapped up a $1.1 billion deal to takeover most of HTC’s smartphone design division, which has brought on 2,000 employees coupled with incremental expenses.

The titan’s “secular digital advertising trend [is] in place,” writes White, who estimates Google Properties revenue will soar 21% year-over-year to $21.13 billion and Google Network Members’ Properties revenue will climb 11% to $4.4 billion. This brings White’s expectations for total Google Advertising revenue growth on a 19% year-over-year rise to $25.57 billion, which would take a whopping 84% slice of sales in the first quarter for Alphabet. White angles for sustained strong performances from both mobile search as well as the programmatic segment, and notes this will keep impacting traffic acquisition costs (TAC). That said, Alphabet anticipates the year-over-year growth in Google site TAC rate will decline following the first quarter. In terms of Google Other revenues, White forecasts a stellar 39% year-over-year lift in sales to $4.31 billion and calls for Other Bets revenue to leap 56% to $380.7 million.

Ultimately, “Biggest bets and other bets add long-term sizzle to the story,” White contends, asserting: “The three biggest bets for Google include cloud, YouTube and hardware. The cloud business reached a $4 billion annual revenue run rate in 4Q17 with deals over $1 million across the cloud portfolio more than tripling in 2017. We have noticed more of our companies starting to partner with the Google Cloud over the past year as the company has been aggressively ramping this business. Also, YouTube had over 1.5 billion monthly users earlier this year and the company has expanded its hardware capabilities with HTC. Last week, Google Home and Google Home Mini launched in India. Moreover, Waymo continues to be a steady hand in the volatile world of autonomous vehicles as evidenced by the Uber incident last month.”

Glancing ahead, the analyst feels “comfortable” with his expectations for the second quarter, where he models a 22% year-over-year jump to $31.62 billion in sales along with $9.86 in EPS. For context, the Street sets expectations for $31.72 billion in revenue and $9.92 in EPS.

Brian White has a strong TipRanks score with a 69% success rate and an impressive ranking in the top 100 on Wall Street: #75 out of 4,788 analysts. White garners 16.2% in his annual returns. Investors who follow White’s recommendation on GOOGL will realize an average of 6.2% in profits on the stock.

The tech empire is a clear favorite on Wall Street, according to TipRanks analytics. Out of 28 analysts polled in the last 3 months, a majority of 25 bet bullish on GOOGL stock with just 3 playing it safe on the sidelines. With a return potential of 19%, the stock’s consensus target price stands at $1,300.00.

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