Alphabet (GOOG) (GOOGL) PT Raised to $950 at JPMorgan; Offers 5 Key Takeaways

JPMorgan analyst Doug Anmuth reiterated an Overweight rating and raised his price target on Alphabet (NASDAQ: GOOG) to $950.00 (from $920.00) following Q2 results. The analyst offered 5 Key Takeaways From Alphabet Earnings:

1) Alphabet’s FXHN revenue growth accelerated from +23% in 1Q16 to +25% in 2Q and was the company’s strongest revenue growth in more than 4 years. The primary drivers remain mobile and YouTube, including benefits from the 3rd mobile ad unit established in 3Q15;

2) Alphabet non-GAAP operating income of $7.5B was ~7% above consensus w/upside coming from both the Google Segment (160 bps of Y/Y margin expansion) and smaller than expected loss in Other Bets;

3) Management reiterated its caution around 2H comps primarily due to the 3rd mobile ad unit, w/similar tone to 3 months ago. Accordingly, we project FXHN Alphabet revenue growth to decelerate to 19% in 3Q and 17.5% in 4Q. However, we are also encouraged by the potential for some offset from early Expanded Text Ads and a 4th mobile ad unit for certain commercial queries, w/the benefits from Google Maps ads coming over an extended period of time;

4) Our 2016 estimates come up ~1%, but 2017 remains flat for revenue and up 3%/1% for non-GAAP EPS; and

5) Our bull case on Alphabet remains: a) strong revenue growth (~20%) driven by mobile and YouTube; b) continued cost discipline w/~116 bps of Google Segment margin expansion in ’16; c) better optimized capital structure and returns to shareholders; and d) attractive valuation at 24x 2017E GAAP EPS and 19x 2017E non-GAAP EPS.

For an analyst ratings summary and ratings history on Alphabet click here. For more ratings news on Alphabet click here.

Shares of Alphabet closed at $745.91 yesterday.

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