Alphabet’s Loon Deploys Internet In Kenya From Balloons

Alphabet Inc. (GOOGL) has launched its first internet commercial service in Kenya yesterday using a fleet of floating balloons provided by its Loon division.

Starting as a project in Alphabet’s X unit, Loon became one of the tech giant’s corporate spin-offs in 2018. The company will deploy 4G LTE service through Telcom Kenya using 35 balloons or “flight vehicles” that will cover an area of 50,000 kilometers of Kenyan territory including Nairobi.

“A company that began building a commercial business just two years ago now has contracts to serve on multiple continents, partnerships with some of the largest mobile network operators in the world,” said Loon’s CEO Alastair Westgarth said in a blog post announcement on Tuesday.

In preparation for launch, Loon initially deployed test balloons that were able to reach 35,000 users with download speeds of 18.9Mbps and upload speeds of 4.74Mbps. The internet balloons hover for over 100 days at heights of near 20km before descending to earth.

Alphabet’s X division refers to its projects as “moonshots” which are designed to test if they can become commercially viable. The company currently has another project called “Wing” which offers deliveries to small locations in Virginia, Finland, and Australia. It also launched Waymo, a driverless taxi service that was deployed in Arizona to a small number of customers.

Not all of Alphabet X’s moonshots have been successful. In February of this year, it shut down its energy kite unit called Makani. According to the Financial Times, in 2019, the division cost the company $4.8 billion which was up $3.4 billion from the year before.

Monness analyst Brian White on July 6 reiterated a Buy rating on GOOGL and a price target of $1420 (implying 5% downside) but cut Q2 earnings estimates, noting the growing global privacy initiatives along with the spread of COVID-19.

On July 7, Needham analyst Laura Martin lowered the company’s Q2 revenue saying, “We lower our Alphabet Q2 revenue estimate down to 7% year-over-year.” She added, “Our GOOGL revenue estimate for FY20 is for flat revenue.” The analyst assigned a Buy rating on Alphabet’s stock and a price target of $1800 suggesting 21% upside.

GOOGL is currently trading up 11% year-to-date with 28 analysts assigning Buy ratings, 2 with Hold ratings, and no Sell ratings which altogether results in a Strong Buy consensus. The average analyst price target stands at $1531.50 with an implication of 3% upside potential. (See Google’s stock analysis on TipRanks).

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