Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Deutsche Bank: Alphabet (GOOGL) Stock Still Holds Promise Long-Term

Amid all the hype surrounding tech giants, including Facebook’s Libra and Amazon’s Prime Day, the fourth-largest publicly traded company, Alphabet (GOOG), is slated to release earnings in just a few hours. 

Knowing Wall Street’s expectations can provide context regarding investors’ overall sentiment toward the company. Upon the release, analysts are expecting EPS of $11.33 and revenue to rise to about $38.2 billion, or a 16.9% rise since last year. The company is expected to show continued increasing ad revenue, which makes up the bulk of revenue and grew 15% last quarter. As usual, Google’s profit will continue to carry the company. 

Ahead of the print, Deutsche Bank analyst Lloyd Walmsley reiterates a Buy rating on Alphabet stock with a price target of $1,400, which implies nearly over 20% upside from current levels. (To watch Walmsley’s track record, click here)

Overall, Walmsley expects further top line deceleration in 2Q to keep shares range-bound, but remains positive on Alphabet shares on a twelve month basis and he sees 4Q growth re-accelerating on the back of new ad product. The analyst expects Google Sites revenue to rise 17% this quarter, “reflecting a slightly more difficult comp from last year and muted feedback on search spend growth (albeit we heard solid feedback on YouTube trends).” 

While Walmsley remains positive over the mid-term given his view on the strong ad product pipeline in 2H and into 2020, the analyst believes his bull thesis likely to take time to play out. As a result, Walmsley says the only way shares would rise on further deceleration “would be if it was supported by specific optimistic commentary regarding the growth outlook for later this year – possible, but unlikely.” 

Google’s Other Bets segments are what many investors are looking for. For example, Waymo autonomous car is held as a leader in self-driving cars, with more than a decade of testing by the company. While mainstream use of the vehicles will take years, progress continues to be made, and investors believe this could be an opportunity worth hundreds of billions of dollars. 

All in all, Wall Street’s confidence backing this tech giant is strong, with TipRanks analytics showcasing GOOGL as a Strong Buy. Based on 32 analysts polled by TipRanks in the last 3 months, 27 saying Buy, while 5 suggesting Hold. The 12-month average price target stands at $1,334, marking a nearly 17% upside from where the stock is currently trading. (See GOOGL’s price targets and analyst ratings on TipRanks)


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