Goldman: Google Worth $800 To $850

• Alphabet Inc GOOGL shares are down 2 percent in the last three months, after recording sharp declines and steep climbs during the period.
• Goldman Sachs’ Heather Bellini maintained a Buy rating on the company, while raising the price target from $800 to $850.
• The company reported better-than-expected results for 3Q15, backed by the performance of mobile search and YouTube, Bellini mentioned.

Alphabet reported its 3Q15 gross revenue at $18.7bn, representing 13 percent y/y growth, and up 21 percent in constant currency terms. The figure was ahead of the consensus estimate of $18.5bn, depicting 12 percent y/y growth. Gross revenue growth accelerated from the 11 percent recorded in 2Q15.

Google’s non-GAAP EPS came in at $7.35, better than the consensus expectation of $7.20. The EPS upside was driven by revenue upside, despite the company’s higher-than-expected non-GAAP operating expenses of $5.7bn, analyst Heather Bellini said.

Google’s non-GAAP operating margin stood at 32.9 percent for the quarter, short of the Street’s estimate of 33.3 percent. The company also announced a share buyback plan of $5 billion.

Google’s outperformance was driven by mobile search and YouTube. “The mobile strength was driven by ad format improvements, while traction with TrueView ads and Google Preferred drove YouTube results as advertisers increasingly migrate over a portion of their TV budgets,” Bellini wrote.

The analyst pointed out that the share repurchase announcement was sooner than expected, merely five months after the appointment of new CFO Porat.

In the report Goldman Sachs noted, “Finally, we are encouraged by the announcement that Alphabet will be including capex (in addition to revenue and profitability) with its segment reporting for its Google and ‘Other Bets’ segments going forward, a testament to management’s commitment to better transparency.”