Google Contrarian: Don't Go Overboard On Alphabet, Cash Flow Reporting Remains Uncertain

In a report published Tuesday, Pivotal Research analyst Brian Wieser maintained a Hold rating on

, with a price target of $620, after the company announced plans to restructure its business into two different segments. Google is effectively changing its name to Alphabet besides subsuming its existing businesses into two distinct reporting segments: the first one containing the bulk of the company's current business and the second one comprising of its non-core businesses including Life Sciences, Ventures, X Lab and drone delivery or Wing. The company intends to shift to segment reporting from its fourth quarter results. The company also named Sundar Pichai as the CEO of the businesses that would be grouped together as the new Google. Analyst Brian Wieser views the news as positive as it "provides incremental transparency into Google's business and suggests the company is looking for ways to balance founder and employee interests with those of the investors." However, the level of transparency to be provided about various aspects, including cash flows, remained uncertain, Wieser added. In the report Pivotal Research noted that the new Google business unit may find that "it needs to compete internally more aggressively in order to compete for capital allocation within Google." Separation of the company's emerging ventures into a separate combined entity may not provide all the transparency investors need to value them, the report stated, while adding that "some of this value may be probably diminished by a conglomerate discount that should be appropriately applied to the combined entity."