Google Analysts Bullish Following Earnings Beat: 'Well Positioned For Reopening Tailwinds'

Alphabet Inc GOOG GOOGL shares traded higher after the company reported a first-quarter earnings beat on Tuesday afternoon.

For the first quarter, Alphabet reported adjusted EPS of $26.29 on $55.3 billion in revenue. Both numbers beat consensus analyst estimates of $15.82 and $51.7 billion, respectively. Revenue was up 34% from a year ago.

Google Cloud revenue was up 46% to $4.05 billion in the quarter, but came up slightly short of consensus estimates of $4.07 billion. YouTube advertising revenue was up 49% to $6.01 billion last quarter, topping analyst expectations of $5.7 billion.

Traffic Acquisition Costs (TAC) totaled $9.71 billion on the quarter, exceeding analyst estimates of $9.25 billion.

Alphabet also announced a new $50 billion stock buyback program.

Related Link: Tesla Analysts Unimpressed By Q1 Earnings: 'Not Much To Write Home About'

Reopening Play: Bank of America analyst Justin Post said Alphabet is his top FANG stock pick given all its long-term growth catalysts.

“We remain constructive on the growing value of adjacent businesses (Waymo, Cloud, YouTube), and think Cloud disclosure will elevate the importance of sum-of-parts valuations,” Post wrote in a note.

Oppenheimer analyst Jason Helfstein said Alphabet is “well positioned for reopening tailwinds.”

“While details are always limited, mgmt highlighted strength of retail/shopping ads, with resurgence in Travel activity,” Helfstein wrote.

Mizuho analyst James Lee said Alphabet has a massive opportunity in cloud services.

“Our recent checks indicated that ML and AI are getting close to an inflection point as workloads in the Cloud are expected to be 40%+ next year,” Lee wrote.

Ad Business Booming: JMP analyst Ronald Josey said the shift of advertising dollars from offline to online is driving an acceleration in YouTube and Search revenue.

“We were most impressed with core search advertising results as Google highlighted strength across most advertising categories, with a core focus on retail, and that travel (a top 5 search ad vertical pre-pandemic) is seeing renewed interest among users,” Josey wrote.

Raymond James analyst Aaron Kessler said Alphabet shares are attractively valued for a company delivering such impressive growth numbers.

“GCP revenue growth continues to be meaningfully above overall Cloud segment rates with momentum from its Data cloud solutions and GCP's multi-cloud capabilities,” Kessler wrote.

KeyBanc analyst Justin Patterson said Alphabet still has multiple growth levers, even at a $1.6 trillion valuation.

“Alphabet demonstrated it still has many levers to sustain high-teens annual revenue ex-TAC over the medium term, from ongoing Search innovation (as demonstrated by omni-channel commerce success), YouTube adding direct response ads, and Google Cloud gaining share,” Patterson wrote.

Ratings And Price Targets:

• Bank of America has a Buy rating and $2,755 target.
• Oppenheimer has an Outperform rating and $2,510 target.
• Mizuho has a Buy rating and $2,800 target.
• JPM has an Outperform rating and $2,850 target.
• Raymond James has an Outperform rating and $2,750 target.
• KeyBanc has an Overweight rating and $2,625 target.