Alphabet Isn't Facebook, Stifel Says In Upgrade

While shares of Alphabet Inc GOOG GOOGL lost more than 4 percent Tuesday in reaction to first-quarter results, Stifel took the opportunity to turn bullish on the stock.

The Analyst

Stifel's Scott Devitt upgraded Alphabet's stock rating from Hold to Buy with an unchanged $1,234 price target.

The Thesis

Stifel's neutral stance on Alphabet's stock was partly based on a cautious stance within the online advertising industry amid Facebook, Inc. FB's data privacy scandal, Devitt said in the upgrade note.

A notable difference separates the two companies, Devitt said: Facebook's data collection relationship with consumers is "public and without consumer intent," while Alphabet/Google's data collection relationship is "private and led by consumer intent."

Alphabet acquires information as users of its platforms privately request information, which prompted the company to take a "more serious approach" to the security and privacy of consumers, the analyst said. Also, Alphabet's products appear to have more "proven durability and utility" in people's lives compared to Facebook, as evidenced by recent weakness in users and usage for Facebook's North American products.

Stifel's price target is based on a 20x P/E multiple on 2019 GAAP earnings, which is a "reasonable" valuation for a company that boasts a global dominance in online search and video and emerging products in cloud, hardware and self-driving cars, Devitt said. 

Price Action

Class A Alphabet shares were trading down 0.17 percent Wednesday at $1,020.88.

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