Alphabet (GOOG) (GOOGL) PT Raised to $925 at BMO Capital

BMO Capital analyst, Daniel Salmon, noted Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) accelerating growth in the quarter and provided a good breakout of how the company assigns revenue. Price target increases to $925 from $825 with the Outperform rating unchanged.

Gross revenue of $21.33B was ahead of our $20.75B estimate and the Street’s $20.77B, while non-GAAP EPS of $8.67 beat our $8.15 estimate and the $8.09 consensus. Total/Sites/Network y/y paid click growth was +31%/+40%/+5%, while cost-per-click came in at -8%/-13%/-16%. The total figures compare with the Street’s +22% and -6% expectations. The new Google vs. Other Bets reporting showed that Google earned $32.9B of adjusted EBITDA in 2015, while Other Bets lost $3.4B. Alphabet repurchased 2.4mm shares in 4Q, and the board also approved an additional 514,000 shares resulting in $3.7B remaining on the program.

In the new revenue breakdown, Core Google breaks down into 3 components:

1) Google website revenue, including Google.com, YouTube, Gmail, News, Finance, Maps, Google Play ads and other proprietary consumer sites and apps (70% of gross revenue, 79% of net advertising revenue after TAC).

2) Google network website revenue, including Google AdSense for Content, Search, Mobile, Mobile Apps, Video and Games, DoubleClick, AdMob, and Google Display Network (20% of gross, 8% of net advertising revenue after TAC).

3) Other Google revenue, including Google Play media sales, Nexus, Chromecast and other device sales (10% of gross revenue).

Other bets, non core revenue, accounts for 1% of revenue and consists of Google Fiber, Calico, Nest, Verily, GV, Google Capital, and X (1% of gross revenue, -10% of Adj. EBITDA).

The $925 price target increased from $825 on a stable multiple as earnings estimates for 2016E increased to $35.17 from $34.32, and 2017E increased to $40.07 from $39.43.

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 $752.00 yesterday.

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