Ahead of fourth quarter results, Pivotal Research analyst Brian Wieser upgraded Alphabet (GOOGL) to Buy as he believes Google remains “the dominant player” in digital advertising and sees data suggesting that “little is getting in the way of its position." Last week, his peer at Canaccord also upgraded Alphabet to Buy saying Google continues to operate from a “powerful position” in the global digital advertising space, dominating in search and ad-supported digital video.
PIVOTAL SAYS BUY ALPHABET: In a research note to investors, Pivotal Research’s Wieser upgraded Alphabet to Buy from Hold and raised his price target on the shares to $1,240 from $1,010. The analyst argued that Google remains the “dominant player" in digital advertising, and data he sees conveys that “little is getting in the way of its position” with either consumers or advertisers. While the analyst acknowledged that Alphabet faces some of the same issues as Facebook (FB), the company appears to be “better managed,” avoiding some of Facebook’s problems as a result. Further, Wieser noted he does not see much downside for Google from regulatory risks such as a Europe-led break-up of the company. If such an event were to happen, individual divisions might even be unshackled and better recognized for their potential value by investors, he contended. Additionally, the analyst argued that other risks such as a more aggressive implementation of GDPR could very well hurt Facebook and help Google. Wieser also upgraded Salesforce (CRM) and Adobe (ADBE) to Buy from Hold, and downgraded Snap (SNAP) to Hold from Buy. Separately, Pivotal Research started coverage of Amazon (AMZN) with a Buy rating.
ALPHABET OPERATING FROM 'POWERFUL POSITION': Last Thursday, Canaccord analyst Michael Graham upgraded Alphabet to Buy from Hold and raised his price target on the stock to $1,250 from $1,140. The analyst told investors that he expects revenue growth to continue in the 15%-20% range for 2-3 years, which coupled with abating margin pressure and share buybacks, should lead to over 15% earnings growth between 2020-2022. Google continues to operate from a “powerful position” in the global digital advertising space, dominating in search and ad-supported digital video, he contended, adding that the company should be a “prime beneficiary in these relatively early stages of marketing budgets migrating to digital media platforms.” Graham also pointed out that competitive risks from Amazon are manageable and said he views the stock as the most defensive of the FANG group given its steady performance and reasonable valuation. Overall, while Google Cloud Platform, Hardware sales, and several Bets projects give Alphabet exposure to emerging industries with secular growth and could drive substantial upside beyond current estimates, stock sentiment in the near to medium term should be largely driven by advertising performance, he noted.
PRICE ACTION: In morning trading, Class A shares of Alphabet have dropped about 1% to $1,065.29.
Alphabet
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Alphabet
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Salesforce
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Adobe
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Amazon.com
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