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Google parent Alphabet is set to report 3rd-quarter earnings on Monday. Here's what Wall Street analysts are saying ahead of the results.
Google parent Alphabet is set to report 3rd-quarter earnings on Monday. Here's what Wall Street analysts are saying ahead of the results.
Daniel StraussOct 28, 2019, 23:40 IST
Google CEO Sundar Pichai.Beck Diefenbach/Reuters
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Alphabet is scheduled to report third-quarter earnings after market close Monday.
Analysts are expecting the company's dominance in search and digital advertising to deliver steady revenue growth.
The tech conglomerate has also been investing heavily in its Google Cloud business, which reached an $8 billion annual revenue run rate during the second quarter.
Here's what Wall Street is saying ahead of Alphabet's report.
Tech conglomerate Alphabet is set to release third-quarter financial results Monday after the closing bell.
Here are some of the key consensus estimates for the company's third-quarter results:
Revenue: $32.72 billion
Earnings per share: $14.11
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Net income: $9.72 billion
Analysts are largely expecting Alphabet-owned Google's entrenched position in the search and digital advertising markets to drive steady revenue growth for the quarter.
There's also been an increased focus on the company's non-advertising businesses such as Google Cloud. Alphabet said on its second-quarter earnings call that its cloud business was one of the largest drivers of overall sales growth with an $8 billion annual revenue run rate.
Investors and analysts will likely be looking to see if the company can continue to grow its cloud business - which includes the G Suite featuring applications like Gmail and Google Drive, as well as enterprise cloud solutions.
The company is furthering its investment in cloud with the launch next month of a cloud-based gaming platform called Stadia. The service will be available starting November 19 for $9.99 per month for the Pro subscription.
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Alphabet has strong support from analysts with 36 "buy" ratings, six "hold" ratings, and zero "sell" ratings.
Here's what Wall Street is saying ahead of Alphabet's third-quarter report:
Bank of America: "We are optimistic on revenue opportunities from new ad formats, Shopping and Cloud."
Price target: $1,450
Rating: Buy
"We are optimistic on revenue opportunities from new ad formats, Shopping and Cloud," Bank of America Merrill Lynch analysts wrote in a note to clients on October 22.
They added: "Catalysts for stock valuation include: 1) traction for Google's new ad formats that include shopping ads and ads in Discover, 2) more visibility on YouTube business which seems to have strong traction and could see OTT ad shift benefit, & 3) evidence of continued traction in the Cloud business (2020 could be Google's year of the cloud)."
Wedbush: "Management has the discretion to deliver significantly higher bottom line contribution than we have forecast."
Price target: $1,500
Rating: Outperform
"Growth in Q3 will likely largely reflect continued solid growth against an increasingly large and maturing base, particularly driven by Cloud, YouTube, and mobile search," Wedbush Securities analyst Michael Pachter wrote in a note to clients on October 24.
Pachter added: "While we are confident that the company can grow revenues in line with our forecast, it is clear that management has the discretion to deliver significantly higher bottom line contribution than we have forecast."
Credit Suisse: "Our conversations with advertisers suggest ongoing resilience in search and YouTube budget growth."
Price target: Raised to $1,700, from $1,500
Rating: Outperform
"Our conversations with advertisers suggest ongoing resilience in search and YouTube budget growth – we believe this is driven partly by increases to ad load for PLA as well as YouTube," Credit Suisse analysts wrote in a note to clients on October 23.
The analysts added: "As such we have raised our Google Properties estimate for 3Q19 as we were previously estimating a rather hefty (400 basis point) deceleration on a currency neutral basis."
Goldman Sachs: "We continue to view Alphabet as one of the best-positioned digital ad companies."
Price target: $1,400
Rating: Buy
"We continue to view Alphabet as one of the best-positioned digital ad companies and see non-advertising revenue streams like Google Cloud becoming a more central part of the thesis over time," analysts from Goldman Sachs wrote in a note to clients on October 17.
The analysts continued: "We expect continued investment to drive adoption of more emerging lines like hardware and Cloud."
RBC: "We continue to believe that Google Maps remains highly under-monetized."
Price target: $1,500
Rating: Outperform
"We are looking for Core Google Gross Revenue of $40.08B (up 19% Y/Y), driven by ongoing strength in Mobile Search, YouTube, Hardware and Programmatic," Mark Mahaney, an analyst at RBC Capital Markets, wrote in a note to clients on October 25.
Mahaney added: "We continue to believe that Google Maps remains highly under-monetized. The broader rollout of Local Campaigns and new Google Maps ad formats could generate between $1.9B and $3.6B of incremental Revenue."
