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Google Now 'Berkshire Hathaway Of The Internet,' Stifel Says Stock Is Worth $850 In Near-Term

Google Now 'Berkshire Hathaway Of The Internet,' Stifel Says Stock Is Worth $850 In Near-Term
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In a report published Tuesday, Stifel analyst Scott W. Devitt upgraded the rating on Google Inc (NASDAQ: GOOGL) from Hold to Buy, with a price target of $850. The analyst called the company "Berkshire Hathaway of the Internet," with potential for a "multi-year stock run."

According to the Stifel report, "Google announced plans to create a new public holding company, Alphabet Inc., which will provide reporting for the core Google business as well as its smaller, more speculative segments separately."

The analyst believes that Google has of late been giving investors "exactly what they've wanted," with its skilled management team that has a disciplined focus on value creation, as well as with its multiple business units that operate with "reasonable" levels of autonomy.

"We believe this combination leaves the possibility for shares to exceed the S&P 500 return for many years on the back of this new operating structure," Devitt stated.

Related Link: Why Google's New Alphabet Structure Is A 'Concrete Example' Of Innovation

The proposed new company will contain the core business, along with businesses such as Nest, Calico, Fiber, Google Capital and Google Ventures, among others. Larry Page is to become the CEO of Alphabet Inc., with Sergey Brin as the President and Sundar Pichai as the new CEO of Google Inc. Pichai is currently the Senior VP of Products at the company.

"Immediately prior to the creation of Alphabet, all shareholders will automatically convert into an equivalent corresponding share of Alphabet stock, and both tickers "GOOG" and "GOOGL" will continue to trade," Devitt noted.

With separate reporting of the core business and the smaller businesses, the analyst expects investors to gain more clarity on the core business' profitability, as well as the growth of some of the company's longer term investments.

"Recent gross margin stabilization and more reasonable consensus earnings estimates also allow for 2Q:15 to be the first of a series of quarters where Google meets or beats consensus estimates, in our view," Devitt added.

Latest Ratings for GOOGL

Dec 2016Aegis CapitalInitiates Coverage OnBuy
Oct 2016Credit SuisseMaintainsOutperform
Sep 2016WedbushDowngradesNeutralUnderperform

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