Alphabet Gains on Wall Street Optimism Over YouTube, Cloud

(Bloomberg) --

Alphabet Inc.’s advertising sales slowdown in March and April wasn’t as severe as some analysts had feared.

A number of firms lifted their price targets on the Google parent after quarterly results that also benefited from revenue growth in the company’s YouTube business and a strong cloud division performance. The average target currently stands at $1,501, up from $1,452 over the weekend.

The Covid-19 pandemic has led to more usage across the group’s assets, MKM Partners analyst Rohit Kulkarni wrote in a note. “More people are searching on Google, watching more YouTube videos, downloading Android apps right now,” Kulkarni said as he reiterated his buy rating.

Shares gained as much as 9.5% in their biggest one-day gain since July 2019. While the stock has gained nearly 30% off a March low, it remains more than 10% below a February peak.

Here’s a summary of what analysts had to say.

RBC, Mark S.F. Mahaney

• Outperform, PT raised to $1,500 from $1,350

Company reported results that were better than feared.

YouTube and Cloud revenue were robust, but March and April have seen major advertising revenue weakness.

Morgan Stanley, Brian Nowak

• Overweight, PT raised to $1,400 from $1,310

2020 and 2021 revenue estimates raised by 4% and 3%, respectively, given YouTube’s better first quarter and stronger-than-expected March search trends.

While search revenue trends deteriorated, the company hinted it’s seen some very early signs of users returning to commercial behavior.

2020 and 2021 share buyback forecasts increased by about $6b and $4b, or 27% and 18%, respectively.

Jefferies, Brent Thill

• Buy, PT $1,450

Advertising revenue slowed significantly in late March, but less than some had feared.

There are some faint signs of recovery in the ad business, and non-ad segments like Cloud held up well.

Notes first quarter share repurchase of $8.5 billion was a record, and increased more than $2 billion from 4Q.

Loup Ventures, Gene Munster

Initial calculations suggest revenue was flat year-over-year in the final three weeks of the quarter, “not bad, all things considered.”

While Google has a sustainable ad business that’s “a fabric of our lives,” top-performing companies post-pandemic will be focused more on working from home: healthcare, wearables, augmented reality, and mobility.

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