RBC Capital top analyst Mark Mahaney is out with a research report on Alphabet Inc (NASDAQ:GOOGL) amid what the analyst considers “the ‘great’ deceleration debate” with Core Google revenue growth on a downturn from 21% year-over-year in its second-quarter to 16% by its fourth-quarter, a result of “tough comps” in the second half of 2016. However, Mahaney believes in YouTube, Alphabet’s triple threat asset, from its global positioning to advertiser value proposition and revenue contribution, deeming these qualities “underappreciated.”
As such, the analyst reiterates an Outperform rating on GOOGL, while raising the price target from $1,000 to $1,025, which represents a nearly 28% increase from where the shares last closed.
As Mahaney assesses the situation, “We see Street H2:16 Google growth deceleration concerns as excessive, with ongoing Search innovations, rising Mobile CPCs, and the growing impact of YouTube, Play & Cloud making ‘16-exit growth rates of up to 20% more likely than the Street’s mid-teens outlook. Our YouTube analysis suggests $10B revenue run rate w/30%-40% growth.”
“YT is the #1 or #2 Entertainment Website across the UK, France, Germany, Japan, and Brazil, per our research. Further, our ad surveys show continued materially positive skews in YT spend intentions – 5:1 “Increase” vs. “Decrease” among marketers. We believe YT is close to reaching a $10B revenue run rate with 30%-40% growth, making it one of the strongest assets on the ‘Net,” Mahaney concludes.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Mark Mahaney has achieved a high ranking of #6 out of 4,200 analysts. Mahaney upholds a 68% success rate and realizes 22.2% in his yearly returns. When recommending GOOGL, Mahaney yields 31.4% in average profits on the stock.
TipRanks analytics indicate GOOGL as a Strong Buy. Based on 32 analysts polled in the last 3 months, 31 rate a Buy on GOOGL, while 1 issues a Sell. The consensus price target stands at $942.50, marking a 17% upside from where the stock is currently trading.