Mizuho Upgrades Google To Buy, Calls Alphabet 'Major Catalyst'

In a report published Tuesday, Mizuho analyst Neil A. Doshi upgraded the rating on Google Inc GOOGL from Neutral to Buy, while maintaining the price target at $715, following the company's announcement of a significant reorganization.

"With the new Alphabet Inc. holding company re-org, we believe that this is a major catalyst for the stock," Doshi stated, while mentioning that the company had announced its plans to create a holding company, named Alphabet Inc.

This holding company would include Google's various business, including the core business, along with Nest, Fiber and others. The management team at Alphabet would include Larry Page as the CEO, Sergey Brin as the President, Eric Schmidt as the Executive Chairman and Omid Kordestani as Advisor. Ruth Porat would be the CFO for both core Google and Alphabet, while Sundar Pichai would be the CEO of the leaner Google.

The analyst believes that this reorganization would offer greater transparency for shareholders, with the new operating structure providing better visibility into the profitability and growth of the core ad businesses, along with greater insight into the venture businesses.

According to the Mizuho report, "This new structure provides a path for more of Google's senior executives to move into new roles and could help prevent further talent loss within the company."

It also unlocks shareholder value, given that the businesses within Alphabet have the potential to gain scale and be potentially spun out by the company. This reorganization also "removes some of the management overhang around the stock, as it shows that management appears to becoming more shareholder friendly," Doshi added.