Top analysts are releasing earnings left and right this week as major companies report earnings. Here, top analyst Mark Mahaney weighs in after Alphabet Inc (NASDAQ:GOOGL) crushes earnings, while Rick Schafer of Oppenheimer explains why he is bullish on NXP Semiconductors NV (NASDAQ:NXPI) ahead of earnings.
Mark Mahaney of RBC Capital was eager to weigh in on Alphabet after the company released earnings yesterday after market close. The company posted gross revenue of $21.3 billion, beating the analyst’s estimates by 2% thanks to Mobile and YouTube revenue, and marking the fastest revenue growth since 2012. Non-GAAP EPS came in at $8.67, beating Mahaney’s estimate of $7.91.
Diving deeper into the earnings report, Mahaney points to the impressive acceleration in revenue and paid clicks. He highlights a 31% y/y increase in paid click growth across Google; the core of Alphabet. Furthermore, he notes an expanding operating margin of 39.5%, even though this came in below consensus estimates of 40.6%.
Mahaney touches on Alphabet’s “Other Bets,” or the company’s moonshot projects, noting, “Other Bets ’15 Revenue of $448MM was shy of our best efforts guesstimate of $771MM… Other Bets ’15 Op Loss of $3.1B was at the low end of our $3-$6B est range.”
As a result of core Google’s strong earnings, he is increasing his ‘17E gross revenue estimate by 3% to $101 billion. He explains, “The Market has wanted four things from GOOGL: consistent rev growth, margin stabilization, greater disclosure & cash back. GOOGL is now over-delivering… We believe GOOGL is placing the right bets on its core, adjacency, and moonshot assets.” Overall, Mahaney reiterates an Outperform rating on GOOGL and raises his price target from $880 to $1,000.
Mark Mahaney has a 58% success rate recommending stocks with a +18.5% average return per rating. According to TipRanks, 21 analysts are bullish on GOOGL while 1 remains on the sidelines. The average 12-month price target between these 22 analysts is $886.89, marking a 15% potential upside from where shares last closed.
NXP Semiconductors NV
Ahead of NXP Semi’s earnings report, scheduled to be released tomorrow evening, analyst Rick Schafer of Oppenheimer weighed in on the company with commentary. Schafer is expecting the semiconductor company to post Q4 sales of $1.575 billion and EPS of $0.97, compared to the overall analyst consensus of $1.54 billion and $1.02, respectively.
He warns that iPhone 6 weakness and “continued channel inventory work-down likely remain a drag through 1Q.” However, this is the first quarter of full synergies between Freescale Semi and NXP since NXP acquired the company in March. Schafer explains, “We see continued significant synergies from the merger with the potential for 20%-plus EPS accretion as cost cuts take root, mgmt reduces/restructures FSL’s high-yielding debt and, most importantly, uses combined FCF to repurchase shares.”
The analyst is also bullish on the company’s auto segment, explaining, “We look for NXP’s Auto segment to begin rebounding in 1Q as channel inventory clears. Now the No. 1 auto semi supplier, NXPI is ideally positioned, in our view, to benefit from continued auto semi content growth.”
Overall, Schafer reiterates his Outperform rating on the stock with a $100 price target.
Schafer has a 68% success rate recommending stocks with a +21.4% one-year average return per rating. According to TipRanks, all 8 analysts who have rated the stock in the last 3 months are bullish with an average 12-month price target of $111.17, marking a 45% potential upside from where shares last closed.