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'We Continue To Like The Company's Fundamentals': Investors, Analysts Cheer Alphabet's Q2 Rebound.

Byline: Dave Royse

Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)'s solid second-quarter results continued to push the stock higher Friday and drove several sell-side analysts to raise their price targets.

Pre-market and early morning buyers sent the Google parent company's stock price up by more than 10% as analysts rushed to reiterate Buy ratings on the company following its quarterly print, which showed a big rebound from a disappointing first quarter.

The Analysts

Raymond James analyst Aaron Kessler maintained an Outperform rating on Alphabet and raised the price target from $1,300 to $1,360.

Mizuho Securities analyst James Lee maintained a Buy rating on the stock and raised the target price from $1,350 to $1,400.

KeyBanc Capital Markets' Andy Hargreaves reiterated an Overweight rating on Alphabet and raised the price target from $1,430 to $1,516.

The Takeaways

Google's back-on-track quarter was boosted by growth in its Google Properties sector of17.5% year-over-year and a winning quarter for Google Cloud, which helped boost licensing and other revenue by 40% over the same quarter last year.

Google Cloud saw an $8-billion run rate, up from $4 billion in the fourth quarter of 2017, and analysts also noted operating expense growth moderation, which helped earnings.


While much of the press around Google these days focuses on cloud computing, don't forget about its traditional business: good, old-fashioned search and advertising, a key element driving the bullishness for Raymond James' Kessler.

Still, the analyst noted growth is slowing there, but said business diversity will mitigate that.

"We expect search growth to slow to low double digits but mobile monetization and traction in new areas should help sustain solid growth," Kessler said in a Thursday note.

Mizuho's Lee also likes video advertising, noting that Alphabet management attributed surprising top-line growth in part to YouTube. After a tough first quarter, it looks like Google's ad business is OK, he said.

"We are relieved that ad revenue growth has rebounded quicker than expected, and we continue to like the company's fundamentals over the longer-term," Lee said in a Friday note.

KeyBanc's Hargreaves said in a Thursday note that new ad products should drive stable growth in core search revenue for Google and expects continued strength for YouTube.

"Beyond those core drivers, (cloud) appears to be accelerating, Maps appears very early in its growth phase and the hardware lineup is improving, all of which should support solid growth for the foreseeable future," the analyst said.

Price Action

Alphabet shares were trading higher by 10.61% at $1,256.42 at the time of publication Friday.

Related Links:

Alphabet Surges After Q2 Earnings, Revenue Beats

Will Google's Earnings Finally Give Investors Reason To Cheer?

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Date:Jul 26, 2019
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