Goldman Reiterates 'Conviction Buy' Rating On Alphabet Ahead Of Q3 Earnings

Goldman Sachs’ Heather Bellini expects Alphabet Inc GOOGL to report its revenue ahead of the consensus expectations, with in-line EPS, when the company reports its Q3 2016 results on October 27.

Bellini reiterated a Buy rating on the company, with a price target of $930.

Q3 Expectations

Reiterating a Conviction Buy on Alphabet, the analyst mentioned that the company’s Q3 ex-TAC net revenue was estimated at $18.04 billion and EPS at $8.63, as compared to the consensus forecasts of revenue of 17.98 billion and EPS of $8.63.

Bellini expects the company to report its non-GAAP operating margins at 33.3 percent, below the consensus expectation of 34 percent.

“Our checks with Google marketing partners pointed to a strong 3Q16 with the majority of partners saying spend came in above their expectations versus their inline view last quarter,” the analyst stated.

What Channel Checks Show

However, the checks also suggest that the constant currency growth for Google Sites was likely to decelerate to a lesser extent than expected.

“Our checks cited the 4th mobile ad link driving CPCs for ad slots 1-3, early monetization of Google Maps, desktop benefiting from expanded text ads, and YouTube seeing a sequential benefit from the presidential election,” Bellini went on to say.

Following the year to date underperformance, the analyst expects Alphabet to begin reversing this trend, as mobile search trends drive the company’s top line growth.