Citi's May Said Alphabet (GOOGL) (GOOG) Reaction on Early Datapoints an 'Over-Reaction'

Citi analyst Mark May is looking to mend damage done to Alphabet (NASDAQ: GOOGL) last Friday after his note on weak datapoints. Shares of Google fell $20, or 2.8% on Friday amid the initial May note.

"We were surprised by the reaction to the Merkle (RKG) and Kenshoo datapoints and our take on them last week, especially considering that we stressed in our note that these were only two datapoints with imperfect predictive power, that they do not include June data, and that depending on how they were applied could also be interpreted as suggesting that 2Q16 search growth (and 2H16 in the case of RKG’s early forecast) is trending in-line with expectations," May commented.

The analyst views these early datapoints as inconclusive. "First, Kenshoo's historical correlation is quite low plus its 300bps sequential deceleration is on a 300bps tougher comp. Second, while some investors are comparing the sequential deceleration in spend at both Merkle and Kenshoo to the consensus expectations for stable seq. growth for Google on a GAAP net revenue basis, the better comparison might be the Street’s Sites FX-neutral growth forecast – which already assumes a ~250-300bps decel (this same reasoning also applies to Merkle's early 2H forecast/comments)."

The analyst conclude that early reactions may be an over-reaction and reiterated his Buy rating and $900 PT on GOOGL.

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 $695.94 yesterday.

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