OK Google, How Is The Street Reacting To Alphabet's Q4 Earnings?

OK Google, How Is The Street Reacting To Alphabet's Q4 Earnings?

Alphabet Inc GOOG GOOGL reported mixed fourth-quarter earnings results. A handful of Wall Street analysts offered their take on the quarter and what's next for Google and YouTube.

Notably, the company disclosed YouTube advertising revenue, which came in at topped $15 billion in 2019, for the first time ever.

The Analysts

BofA Securities analyst Justin Post maintains a Buy rating on Alphabet's stock with a $1,620 price target.

Nomura analyst Mark Kelley maintains at Buy, price target lifted from $1,560 to $1,680.

Piper Sandler analyst Michael Olson maintains at Overweight, price target lifted from $1,500 to $1,600.

BofA: 'Bigger Story' To Read

Alphabet reported a revenue and EBIT miss in the quarter while GAAP EPS came in better than expected, Post wrote in a note. Beyond the headline numbers, other "sentiment drivers" were mixed, including Core Google operating margins rising two basis points, new Cloud disclosures point to a 53% growth rate and Infrastructure cloud growing faster, and management offered "early signs" of a more shareholder-friendly policy through incremental share repurchases in the quarter.

Despite a mixed overall earnings report, the analyst remains "optimistic" on the company's outlook. The cloud business showed growing adoption with $11.4 billion in the backlog and YouTube has room to grow from its current $7 to $8 per user in ad revenues in 2019.

Instinet: Growth Through Disclosure

Alphabet's miss can be mostly attributed to a shortfall in its Hardware business, Kelley said. The company disclosed new metrics for YouTube ads and subscription metrics along with data readouts from the Cloud business.

Management disclosed YouTube ad revenue rose 36% in 2019 while the Cloud business also grew 53%. The company also highlighted its success in cross-product service offerings among consumers and enterprise customers.

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