After a strong start out of the gates in 2018, Alphabet Inc (Nasdaq: GOOG, GOOGL) stock has cooled off a bit amid increasing concerns over data security and potential new regulations on online advertisers. Despite the challenges, analysts say Alphabet stock is a compelling long-term value ahead of its earnings report expected out on Monday.
Following his latest round of checks, Bank of America analyst Justin Post says Google ad spending seems to be in-line with Wall Street forecasts in 2018. Post says Google is currently navigating a number of potential risks, including rising traffic acquisition costs and the implementation of the General Data Protection Regulation in late May. However, Post says there are plenty of Alphabet buyers waiting for an opportunity to jump into the stock.
[See: 8 Catalysts That Are Moving Amazon Stock.]
“We see this as a wait-and-see quarter, but like the stock as we expect buyers to return to the stock after GDPR enforcement and ahead of 2Q results as YouTube growth, TAC pressure, and year-over-year expense trends should improve in 2Q,” Post says.
Bank of America is expecting Alphabet to report mixed results on Monday. The firm expects earnings per share of $9.25, slightly below consensus estimates of $9.30. Bank of America is also calling for revenue of $24.9 billion, slightly above Wall Street expectations of $24.3 billion.
In addition to the top- and bottom-line numbers, Post says investors will be watching for updates on a number of key items, including search trends, expense trajectory, TAC guidance, commentary on GDPR, new ad products (particularly on YouTube), Google Cloud and Waymo.
With investor sentiment currently mixed, Post says Alphabet stock trades at just 13 times Bank of America’s 2019 EPS estimate, making the stock a great value given its growth numbers.
“We believe Google should trade at a premium to over the last five years given shareholder friendly actions (buybacks and disclosures) and new product catalysts,” Post says.
[See: 7 of the Best Stocks to Buy for 2018.]
GBH Insights head of technology research Daniel Ives says successfully monetizing YouTube is Alphabet’s top priority at the moment.
“It all comes down to stellar mobile search and advertising growth, with YouTube remaining a key under-penetrated asset in the Google product portfolio, in our opinion,” Ives says.
Bank of America has a “buy” rating and $1,360 price target for Alphabet. GBH Insights has a “highly attractive” rating and $1,280 target for GOOGL stock.
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Alphabet Inc Earnings Preview: What To Expect From GOOG, GOOGL Stock originally appeared on usnews.com
