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Credit Suisse's Target On Google Maintained At $920 Following Earnings

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Alphabet Inc GOOG GOOGL reported its 1Q earnings with the adjusted EPS below the consensus expectations, driven by one-time expenses.

Credit Suisse’s Stephen Ju maintained an Outperform rating on the company, with a price target of $920.

1Q Results

Alphabet reported net revenue in line with the estimate, with the adjusted EBITDA marginally above the estimate.

“Strong top-line growth was driven by the familiar factors seen in 4Q15 – namely mobile search, YouTube, and Programmatic,” Ju mentioned.

Google Play drove acceleration in the year on year growth rate, which was offset by higher associated TAC.

According to the Credit Suisse report, “Google continues to show signs of OpEx control and controlled CapEx as both came in below our expectations, which led to better-than-expected Adj. EBITDA.”

Management also offered increased visibility into impending investments on Alphabet’s cloud platform.


Ju believes that product-driven catalysts would continue to benefit the company in future quarters.

The analyst also expects “continued narrowing of mobile-desktop monetization gap in Int'l combined with eventual higher pricing for mobile CPCs through a combination of the continued benefits from Enhanced Campaigns as well as a plethora of other products.”

Over time, the company’s larger non-search businesses are expected to contribute at a higher than anticipated level, especially YouTube and Google Play.

In addition, Ju anticipates “optionality for shareholder value creation from Alphabet's "Non-core Other" line.”

The FY16 net revenue estimates has been lowered to reflect higher Licensing & Other revenue.

Apr 2016SunTrust Robinson HumphreyMaintainsBuy
Apr 2016Morgan StanleyMaintainsOverweight
Apr 2016Stifel NicolausMaintainsBuy

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