Alphabet Inc (GOOGL) Stock: Citigroup Describes Recent Sell-off on Early Data points as ‘Over-Reaction

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Citigroup has a $900 price target and a Buy rating on Alphabet’s stock

Citigroup analyst has come out in defense of Alphabet Inc (NASDAQ:GOOGL) after inadvertently causing damage to the company’s stock price last week. During the last five days, Alphabet stock has declined by 3.31% while NASDAQ index has remained generally flat during the same timeframe.

Citigroup analyst, Mark May in an updated research note sent out to clients and investors rectified his position on the company’s stock in light of Merkle and Kenshoo data points he alluded to earlier.

“We were surprised by the reaction to the Merkle (RKG) and Kenshoo data points and our take on them last week, especially considering that we stressed in our note that these were only two data points with imperfect predictive power, that they do not include June data, and that depending on how they were applied could also be interpreted as suggesting that 2Q16 search growth (and 2H16 in the case of RKG’s early forecast) is trending in-line with expectations,” said Mr.May.

The analyst believes such data points do not set anything in stone, describing them as inconclusive. Mr.May highlights that in most of the previous instances, Kenshoo’s correlation is very low. Additionally, he writes that the 300 basis points deceleration they reflect on a sequential basis is in relation to tougher comparable by the same degree.

On another note, Mr. May refers to certain investors comparing the quarter over quarter deceleration in spending at both Kenshoo and Merkle to consensus estimates according to which Google will grow at a stable rate in terms of GAAP net revenue. He adds that instead, these investors should look to the Street citing FX-neutral growth projections whereby a 250-300 bps deceleration is already factored in. He goes on to add that the same is implied on Merkle’s recommendations for the early part of this year’s second half. Mr.May has a $900 price target and a Buy rating on Alphabet stock. Alphabet shares were up by 0.38% during early trading today.

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