Google parent Alphabet (GOOGL) - Get Report share were rising in pre-market trains got Friday as UBS analysts penned a note raising its price target on the stock from $1,460 to $1,675 based on valuation considerations.
Shares were up 0.7% to $1,460.39 in early morning trading on Friday. On Thursday, Alphabet closed at a market valuation of $1 trillion for the first time, becoming the fourth U.S. company to ever attain that lofty level.
UBS wrote that applying an 18x EV/GAAP EBIT multiple to Alphabet’s core Google operating estimates in 2021 already yields a share value of $1,662 and in the process, assigns a zero to negative value to Alphabet’s Other Bets. It also wrote that Google Cloud is a promising long-term opportunity for the company as it builds scale. Its new price target represents about 15% from Alphabet's current level.
“We believe the current valuation does not give full credit to [Alphabet’s] scale advantages, the potential for better capital allocation and cost efficiencies, or its cash balance (reflecting uncertainty over future shareholder returns and regulatory overhangs),” UBS wrote.
The investment bank also noted that “as we enter 2020, any additional disclosure from the company (as opposed to our framework for divisional revs/margins) could unlock additional value for public market investors.”
Alphabet shares are up 34% over the last year, compared to a 26% gain for the S&P 500.