Alphabet (GOOG) PT Raised to $880 at UBS

UBS analyst Eric Sheridan reiterated a Buy rating and bumped his price target on Alphabet (NASDAQ: GOOG) to $880.00 (from $875.00), saying the 2015 stock move was the beginning of a long-term shift.

Sheridan commented, "Roughly one year ago, we addressed the top ten debates for (then) Google in an 80-page deep dive report. Despite solid stock performance over the last 12 months, many key debates remain unresolved, and investor questions suggest Alphabet faces a wall of worry beyond 1H'16. In our view, the stock remains inexpensive against its medium/long-term growth potential – more specifically, despite its absolute market cap, revenue base & relative maturity (vs. some peer Internet companies), we see opportunities for Alphabet to surprise investors to the upside on revenue growth (advertising, mobile computing, media consumption & enterprise), margin stability & return of capital. Accordingly, we reiterate our Buy rating & Key Call on GOOG."

The analyst sees 3 key debates that will drive operating results and share price performance for Alphabet over the 2016-2020
timeframe:

1) Revenue Growth – the firm estimates that Alphabet will produce mid-to-high teens revenue growth on the back of mobile advertising, YouTube, Google Play, Enterprise (cloud/apps) & Other Bets, and we believe that worries about decelerating long-term trends are misplaced;

2) Operating Margins – they estimate that core Google operating margins will continue a flat-to-upward trajectory on more efficient opex and inherent scale leverage (particularly in areas such as YouTube), though investors must acknowledge the mix shift pressure that Enterprise growth initiatives will likely place on consolidated margins longer-term;

3) Capital Allocation – in their view, Alphabet will strike a balance in capital allocation between pursuing large-scale (1b+ users) revenue opportunities, bolstering Alphabet's strengths in computing (machine learning/AI, mobility & rich user experiences), and returning excess capital to shareholders.

New FY'16 ests: net revs $72.2b (vs. Street $71.3b); Adj. EBITDA $35.7b (Street $35.2b) & Adj. EPS $34.89 (Street $34.52). New FY'17 ests: net revs $85.0b (vs. Street $82.8b); Adj. EBITDA $42.7b (Street $41.0b) & Adj. EPS $40.96 (Street $40.16).

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 $737.80 yesterday.

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