Shares of Alphabet Inc. GOOGL, formerly Google, climbed more than 2%, touching $782.82 and eventually closing at $782.24, following an increase in the price target to $1,000 from $900 by the advisory firm, Axiom Capital. In addition, Axiom Capital analyst Victor Anthony reiterated a Buy rating on the stock.
According to Anthony, Alphabet’s earnings will surpass the consensus estimate in the upcoming quarter. He believes that continued growth in YouTube and acceleration in paid search spending, driven by increased mobile click volume, will boost earnings.
Google’s YouTube is the world's leading online video sharing platform. The online video unit attracts more than a billion users every month, plays host to countless viral clips and creates sensations overnight. Google’s video wing’s progress, particularly TrueView ad, is also worth tracking. Lately, the company has been going for premium content to attract higher ad prices and possibly a streaming/subscription service.
These moves will help the online-video unit to attract more audience, in turn boosting advertising revenues and margins.
Also, the analyst remains encouraged by the company’s efforts to develop a mobile messaging application to compete with similar services offered by Facebook Inc. FB. The new service will leverage Google's artificial intelligence know-how, involving chatbots. These are software programs within a messaging app that search the Internet to answer a question.
Moreover, Alphabet’s Google recently entered into a joint venture with Ford to build driverless vehicles. Through this partnership Google will gain expertise on mass production of automobiles, while Ford will be able to leverage the former’s real-world autonomous drive research.
For 2016, Anthony raised the revenue estimates to $87.64 billion from $85.89 billion and adjusted EPS to $35.19 from $34.35. Also, for 2017, he increased revenue estimates to $102.85 billion from $9889 billion and adjusted EPS to $44.12 from $42.10.
Alphabet is one of the leading providers of target-based advertisements on the web. The company has shown good execution to-date maintaining its position in a competitive, fast-growing search market. Its traction in the search market is a major positive, which along with its focus on innovation, strategic acquisitions and Android OS should generate strong cash flows, going forward.
Alphabet currently has a Zacks Rank #2 (Buy). Investors may consider stocks like Akamai Technologies, Inc. AKAM and MeetMe, Inc. MEET, both sporting a Zacks Rank #1 (Strong Buy).
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