by winston » Fri Nov 15, 2019 1:04 pm
not vested
Alphabet (GOOGL)
We all know Alphabet; the parent company of Google, with a market cap of $893 billion, is the world’s fourth-largest publicly traded company.
With over $136 billion in annual revenue, and $30 billion in net income, there is no doubt that Alphabet will hold its position near the top.
GOOGL shares are up 24% year-to-date, just slightly outperforming the S&P 500, after an earnings miss in the Q3 report.
While revenues were up, at $40.5 billion, the EPS of $10.12 missed the forecast by 18.5%.
The earnings slip came as the company increased capital expenditures from $5.28 billion one year ago to $6.73 billion in the current report.
The company is increasing spending on its cloud sales force, and has just made a $2.1 billion offer to acquire smartwatch company Fitbit.
The acquisition, if approved, will put Google in a direct position to compete against Apple in the smartwatch and wearable niche.
Fitbit will make an interesting addition to Alphabet’s ‘other revenue’ category, which includes both cloud systems and hardware. This category saw quarterly revenue of $6.43 billion, beating the forecast of $6.32 and coming in 38.5% above the year-ago quarter.
So GOOGL has a firm foundation in its core search engine business, strong ad revenue, and rising revenues in its other endeavors.
It’s a solid picture, and explains why the stock makes up 2.26% of Goldman’s ‘international exposure’ basket. Google’s global reach and profitability are undisputed.
5-star JMP analyst Ronald Josey is enthusiastic about the Fitbit acquisition, putting a $1,450 price target on GOOGL and writing, “We believe Fitbit is a natural fit with Google’s current hardware brands that include its Pixel phones, Nest connected home products, and Google home smart speakers under its Made By Google brand, along with its Android OS… we believe Google is investing in developing the hardware and touchpoints that will enable its ambient computing strategy…”
Josey’s price target suggests an upside for 12% for GOOGL shares.
5-star analyst Stephen Ju, of Credit Suisse, focused more on Alphabet’s free cash flow position in his comments, saying, “Google in our view is a controlled outcome, with management looking to drive consistent revenue and FCF growth through the amassing and creation of a portfolio of assets even as the law of large numbers begin to result in deceleration for some of the largest businesses…
Overall revenue growth has once again settled into a managed ~20%+ range… Google has resumed free cash flow growth this year after two years of investments.” Ju puts a $1,700 price target on the stock, showing confidence in a bullish 31% upside.
GOOGL’s Strong Buy consensus rating is based on 25 Buys set in the past three months, against just 4 Holds. Analysts are confident that the company can meet the challenges inherent in the ever-changing digital world.
Shares sell for an eye-popping $1,296, but the average price target, $1,455, truly gets into nosebleed territory. The stock has an average upside of 12%.
Source: Tip Ranks
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