How high can shares of Google parent Alphabet Inc. go?
Mizuho Securities thinks $2,350 after raising its price target 12% following the search-engine behemoth’s most-profitable quarter ever ($15.23 billion) on Tuesday. Try $2,400, according to Evercore ISI. No, $2,500, says Needham Research. “To the moon,” exhorts AB Bernstein analyst Mark Shmulik, who hiked his price target 14% to $2,500.
None of them, however, can top Susquehanna analyst Shyam Patil, who jacked his price target 50% to $3,000.
Alphabet’s stock GOOGL,
Analysts are gaga over Alphabet’s second straight record quarter of profit, which reflects a booming search business (up 17% to $31.9 billion), YouTube ad sales (up 46% to $6.9 billion), and Google Cloud (up 47% to $3.83 billion).
“We anticipate antitrust investigations to carry on with great fanfare this year and consumer privacy initiatives to grow; however, we believe the stock reflects these risks and Alphabet is worth more broken up than at its current valuation,” Monness Crespi Hardt analyst Brian J. White said in raising his price target 20% to $2,500.
Perhaps the most encouraging news was the performance of search revenue in the teeth of a pandemic that has all but eviscerated the travel industry.
Search revenue came in 3% better than expected, based on estimates from Morgan Stanley analyst Brian Nowak. “We estimate this is on par with the 17% Y/Y growth Search delivered in January/February ’20 despite the fact that the 10-15% of Search revenue associated with travel is still depressed (down 50%+),” he wrote in raising his price target 7% to $2,200. “This makes us incrementally bullish about the cadence of Search as travel recovers over the course of ’21.”
Even Google Cloud, whose revenue badly lags behind that of Amazon.com Inc.’s AMZN,
“Since [Alphabet Chief Executive] Sundar Pichai took over the reins of Alphabet we’ve seen an increased focus and discipline on cost management — holding back on further investments in businesses with longer time horizons and divestments — and focusing freed up budget into key growth areas including Cloud, YouTube, and Commerce,” Shmulik said in a note Wednesday that rated the stock as outperform. “Overlay slowing down hiring cadence in a volatile 2020 and Operating Margins expanded 4ppt QoQ to 28% — the highest level since 1Q18. While we expect hiring to re-ramp, margin levels should persist.”
Jefferies analyst Brent Thill, who reiterates a buy rating and elevated his price target to $2,400, notes that Google Cloud backlog was up nearly 60% sequentially.
