Get Ready For Alphabet's Q4 Earnings Report

Alphabet Inc GOOG GOOGL will report its fourth-quarter numbers Thursday, and this quarter could highlight the potential from the company's handset business — Pixel phones.

From The Street

Wall Street expects the search giant to earn $9.64 a share on revenue of $25.23 billion. In the past four quarter, Alphabet’s earnings have topped Street view thrice, with positive surprise ranging between 4.7 percent and 6.9 percent.

Deutsche Bank's Commentary

Deutsche Bank’s checks were upbeat on order volumes for 2017 for 6 million–9 million units. The brokerage model Pixel smartphone units of 1.5 million in the fourth quarter and 7 million in 2017.

Analyst Lloyd Walmsley said the phone business could scale into higher margins, with his base case of Pixel units remain sub 10 million through 2018. But, the phone business could tilt the risk/reward in to a more favorable zone if Google flexes its muscle on marketing spends.

“If Google puts aside concerns around the Android ecosystem, and puts $100+ million in quarterly marketing behind Pixel, each 1ppt of smartphone market share at a 15 percent operating margin could be worth ~$20/share to Google (+2 percent) and make the shares an even stronger play on Virtual Assistants and artificial intelligence,” Walmsley wrote in a note.

Meanwhile, Walmsley sees Google Sites revenue growth ex-FX of 21.5 percent year-over-year, a 3.8ppt drop on a 2.5ppt harder comp, or $17.88 billion (vs Street $17.94 billion). The analyst also forecast core EBITDA margins declining 2.5ppts due to higher costs towards Pixel.

Walmsley, who has a Buy rating on the Alphabet shares, raised his target price to $1,090 from 1,080.

At last check, shares of Alphabet were up 0.46 percent to $853.42.