Alphabet (GOOGL) - Get Report heartened analysts by reporting first-quarter revenues that were not as bad as expected, giving one of the first looks at how the coronavirus pandemic has affected results at a U.S. tech giant.
Many analysts raised their price targets on Alphabet as a result, whose shares were rising 8% to $1,331.10 on Wednesday morning.
Here’s what analysts had to say about the quarter:
JP Morgan (Overweight, Price Target Increased to $1,505)
Overall, we come away from GOOGL earnings increasingly comfortable in the company’s ability to navigate the current environment while maintaining some earnings power & continuing to innovate for the long-term. We like the increased transparency into the shape of 1Q & 2QTD, along w/$8.6B of buybacks in 2Q, up from $6.1B in 4Q…Long-term digital trends, however, will continue to move in GOOGL’s favor, & we believe the company is positioned to capture greater share of linear TV spending, shopping search dollars, cloud adoption, & a number of other key initiatives.
Credit Suisse (Outperform, PT increased from $1,500 to $1,600)
Given Google’s sprawling global footprint for its advertising franchise, trying to pin down headwinds against 2Q20 growth on an absolute basis on limited visibility was always going to be a difficult exercise. That said with management providing 1Q20 exit velocity for Search, YouTube, and Network at around -15%, up high-single-digits, and down low-double-digits respectively, this serves to at least quantify the value destruction from COVID-19, which today is no longer as open ended. As we have noted, Google should emerge from this crisis in a stronger position, with Product Listing Ads, local/Google My Business, and YouTube to benefit from advertising, and GCP to benefit from what should be accelerated enterprise adoption.
Morgan Stanley (Overweight, Price Target Raised to $1,400)
Ad declines are likely to be somewhat less severe than expected and GOOGL is focused on efficiency/innovation to emerge stronger post downturn. But EBIT still falls (higher de-leverage) which shows how outperformance from here likely to require a confirmed turn in ad trends.
RBC (Outperform, PT Raised from $1,350 to $1,500)
GOOGL reported BTF (Better Than Feared) Q1 results – Revenue came in above RBC/Street due to robust YouTube & Cloud Revenue, but March & April seeing major Ad Revenue weakness, w/ Search down mid-teens % Y/Y. GOOGL is seeing “very early signs of recovery in commercial Search behavior,” but Ad Revenue is not yet improving.
Stifel (Buy, PT Raised from $1,300 to $1,400)
The near-term environment remains challenging for Alphabet as growth rates across many of the company’s businesses exited March meaningfully lower than the start of 1Q. While the timing of a broader recovery remains unknown, advertising revenue on the platform has historically recovered quickly following periods of economic volatility. We are confident in Alphabet’s ability to continue capturing advertising market share once conditions normalize and are encouraged by the continued momentum in the company’s Cloud segment.
-Scott W. Devitt