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FINANCIALS

Google Parent Alphabet Inc (GOOGL) PT Cut to $850 at SunTrust After Q1 Earnings

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After the search giant released its first quarter earnings, SunTrust Robinson lowered its price target on the stock to $850

Yesterday, Alphabet Inc. (NASDAQ:GOOGL) released its quarterly earnings report for the second quarter of fiscal year 2016. The $502 billion company missed the Street on both its top and bottom line numbers this time. Following the announcement, research firm SunTrust Robinson Humphrey cut its price target on the stock from $875 to $850.

For the March quarter, the search giant reported GAAP revenues of $20.26 billion, up 17% from last year, yet slightly below the consensus of $20.38 billion. Non-GAAP earnings per share totaled $7.50, missing the Street by an unpardonable 46 cents, while posting 15.92% year-on-year increase. The 46-cent difference can largely be attributed to investments and headwinds from mobile, increased traffic acquisition costs, and increased capital expenditure. While the revenue was mostly driven by advertisements and mobile search growth, aggressive investments on core and side bets led to the EPS miss. Management also lowered its EPS guidance for 2017 from $40.33 to $38.56.

On one hand, SunTrust analyst Robert Peck believes the stock remains well-positioned, but on the other hand, he also trimmed his 12-month price target for the stock, with his updated one reflecting a 20x multiple of the core EPS and a 13.5x enterprise value-to-earnings before income taxes depreciation and amortization (EV/EBITDA) ratio. The analyst maintained his Buy rating on the stock.

In contrast, Cowen analyst John Blackledge, was rather positive on the stock following the Q1 earnings report.  The operating income trumped Mr. Blackledge’s estimate by 2%, which, he believes, was largely owing to strong mobile search growth. Growth in paid clicks was slightly slower than the analyst’s expectation of 32%, as it turned out to be 29% YoY, still above a consensus of 27%. The analyst maintained his outperform rating and $940 price target on the stock.

The Street currently has 5 Strong Buys, 7 Buy, and one Hold rating on Alphabet stock. Class A Shares last traded at $731.42 as of 12:54 EDT Friday, down 6.23% from their previous close.

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