Alphabet Has Best Day Since 2015 After ‘Very Strong’ Results
Alphabet shares jumped on Friday, after it reported Q2 sales that rebounded from a surprise slowdown in the prior period.
(Bloomberg) -- Alphabet Inc. shares jumped on Friday, after the Google parent reported second-quarter sales that rebounded from a surprise slowdown in the prior period.
Analysts cheered the results, with a number of firms lifting their price targets .They also pointed to a mammoth $25 billion share buyback program as providing support to the stock.
Shares gained as much as 11%, the company’s biggest one-day percentage gain since July 2015, according to Bloomberg data. At current levels, the stock is about 3% below its record close, hit in late April.
Here’s a summary of what analysts are saying following the earnings:
BMO Capital Markets, Daniel Salmon
This was a “solid” report for revenue after the first quarter disappointed, and margins were particularly strong relative to recent trends.
With large-scale M&A unlikely in light of the antitrust overhang, continued growth of buybacks should make value investors increasingly comfortable.
Affirms market-perform rating but raises price target to $1,225 from $1,150. However, says would look for a better entry point.
Pivotal Research, Michael Levine
Expects consensus numbers to move up “a lot” on the back of a “very strong print.”
However, views the company as being at greatest risk of the Department of Justice anti-trust review, “which has kept us --and likely continues to keep us -- on the sidelines.”
Neutral rating, raises price target to $1,350 from $1,250.
RBC Capital Markets, Mark S.F. Mahaney
“Fundamentals snapped right back” from the first quarter, with revenue growth excluding foreign exchange movements matching the average of the past nine years.
Notes that operating margins were down 130 basis points year-on-year.
Outperform, raises price target to $1,425 from $1,300
Jefferies, Brent Thill
Most key metrics beat consensus, with free cash flow better amid low capex, although cash flow from operations missed slightly.
Buy rating, raises price target to $1,500 from $1,450
Morgan Stanley, Brian Nowak
Continued use of machine learning and innovation led to a 150 basis point sequential acceleration in ex-FX websites growth -- the third-largest gain in four years.
Still not entirely clear what the most material drivers of the first quarter deceleration were.
Apex came in lower than expected, which is positive for free cash flow. Raises 2019-2020 EPS estimates by 7%-10%.
Overweight, raises price target to $1,450 from $1,400
Cowen, John Blackledge
Outperform, raises price target to $1,500 from $1,400
Operating income beat was due primarily to better-than-expected cost leverage in sales and marketing, general and administrative expenses, and to a lesser extent R&D.
Loop Capital, Alan Gould
Hold, price target $1,250
Google beat Loop’s estimate for website revenue growth by 50 basis points, even though the broker was 40 basis points above consensus.
Not surprised to see a rally in after-hours considering weak sentiment, investor concern over deceleration in growth and suggestions of continued softness in advertising dollar allocations following the first quarter miss.
What Bloomberg Intelligence Says:
“The robust 2Q beats on sales and earnings may help abate controversial and far-stretching concerns over YouTube growth, likely meaning 1Q was a blip.”
-- Analyst April Kim
-- Click here for the research
--With assistance from Kit Rees, James Cone and Ryan Vlastelica.
To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net
To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Steven Fromm
©2019 Bloomberg L.P.