UPDATE: Alphabet (GOOGL) PT Raised to $2,200 as Morgan Stanley Sees YouTube as Undervalued

Morgan Stanley analyst Brian Nowak raised the price target on Alphabet (NASDAQ: GOOGL) to $2,200.00 (from $2,050.00) after reporting earnings that demonstrated Online Ad Markets appear to be at an inflection point and Search appears to be back at early 2020 levels despite travel remaining challenged. However, a key standout issue in the quarter is YouTube, possibly the most undervalued ad platform in the internet sector.

The analyst maintained an Overweight rating, stating "YouTube Y/Y revenue growth accelerated to 46% Y/Y (from ~32% Y/Y in 3Q)…coming in ~2% better than we modeled. Continued strength in direct response (DR) and the branded ad market recovery drove the growth. This makes us bullish about YouTube into ’21 as we believe its DR product materially improved throughout ’20…which combined with a stronger branded ad environment positions it for 40%+ revenue growth. We have written about GOOGL’s sum of the parts value…and in our mind YouTube being implicitly valued at ~14X ’22 EBITDA (GOOGL company-wide multiple) while other online ad platforms like ROKU/SNAP/PINS trade at 12-20X ’22 revenue speaks to the disconnect and rerating
opportunity.

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