Following the results, Credit Suisse maintained its Outperform rating and raised its target price on the shares to $1,120 from $1,070, saying, “Machine learning drove product improvement as well as efficiency.”
Alphabet-owned Google reported
“We continue to anticipate benefits from recent ad product rollouts (Expanded Text Ads, etc.) as ongoing catalysts,” analyst Stephen Ju wrote in a note.
Though higher-than-expected traffic acquisition costs led to about 20bp adj EBITDA margin compression, the analyst focuses on the
Google Site revenues rose 23 percent to $$16.1 billion versus Credit Suisse’ $16.0 billion estimate, while Google's Network revenues came in at $3.7 billion (up 1 percent year over year) versus Credit Suisse’ $3.9 billion estimate.
As for Google's L&O line, the analyst believes Google Play grew about 47 percent in the quarter on an FX-neutral basis and sees fourth quarter rate to decrease to about 28 percent.
Ju raised his FY16 net revenue forecast by 21bps on higher Web Sites and Licensing & Other revenue, and adj. EPS view for FY16 by 2.4 percent to $34.11 from prior estimate of $33.29.
- “Continued narrowing of mobile-desktop monetization gap in Int'l combined with eventual higher pricing for mobile CPCs.”
- “Larger-than-expected contribution from Google's larger non-search businesses, namely YouTube and Google Play.”
- “Optionality and upward bias to estimates and shareholder value creation from Alphabet's other bets.”
At the time of writing, GOOGL shares of Alphabet rose 2.01 percent to $833.74. The revised target of $1,120 represents a potential upside of 34 percent from current levels.
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