Alphabet to Gain 10% on Strong Ad Growth: Goldman

Google Search On Apple iPad2

Global tech titan Alphabet Inc. (GOOGL) has room to run as it maintains its leadership position in the advertising and internet search realms, according to one team of bulls on the Street, reported CNBC. (See also: 8 High-Profit Tech Picks From Goldman Sachs.)

In a note to clients Thursday, analysts at Goldman Sachs lifted their 12-month price target on the Google parent company to $1,350, up from $1,250. Goldman’s new price target reflects an 11% upside from Wednesday close. Analyst Heather Bellini cited checks with advertisers, forecasting second-quarter results for the Mountain View, California-based company to come in above consensus estimates. “Our advertiser checks point to a solid 2Q, with particular strength noted in overall pricing, mobile search and product ads. Following our conversations with ad partners, we believe there is upside risk to consensus revenue estimates,” wrote Bellini. Google reiterated its buy and conviction-list ratings for Alphabet. 

Effects From Higher Ad Prices

The analyst added that increased ad pricing should benefit to the search giant, indicating that one advertising customer said Alphabet lifted its pricing by a double-digit percentage year-over-year (YOY) in Q2. “Partners also noted continued strength in YouTube, and particular strength in Shopping ads. Product innovation remained a key topic as well, with partners expecting continued innovation,” stated Goldman. 

On Wednesday, European authorities fined Google a record $5.1 billion for abusing its power in the smartphone market and demanded that the firm change its practices. Last year, the EU imposed a $2.7 billion fine over its unfair favoring of its own services in internet search results. Despite the ruling, it should be “a long road to any actionable activity in the market,” as noted by Investopedia’s Shobhit Seth. (See also: Google: Will EU’s $5B Fine Curb Its Dominance?)

Alphabet stock is trading flat Friday morning at $1,187.05, reflecting a 13.4% increase year-to-date (YTD), compared to the S&P 500’s 4.9% increase and the Nasdaq Composite Index’s 13.7% gain over the same period. Alphabet is slated to report its most recent quarterly results on July 23. (See also: Alphabet: Profits and Expenses Surge in Q1.)

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