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Watch Google's 'Other Bets' Category When It Reports Earnings

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Watch Google's 'Other Bets' Category When It Reports Earnings
  • Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) shares have appreciated 38.08 percent over the past one year, reaching a high of $793.96 on December 29.
  • Raymond James’ Aaron Kessler has maintained an Outperform rating on the company, with a price target of $790.
  • Kessler expects investors to focus on the company’s new segment reporting, including its core business and "Other Bets," when the company reports its earnings on February 1.

According to the Raymond James report, “The bottom line is that while not as bullish on the Other Bets disclosure for the 4Q call, overall we remain positive on Google given the strength of its core search platform, strong mobile positioning, YouTube, and display businesses as well as reasonable valuation.”

Analyst Aaron Kessler expects losses in the range of $0.5–1 billion for Other Bets, and believes investors are expecting a higher loss amount, while underappreciating the impact of higher growth segments, such as YouTube and Google Play Store.

Related Link: Mahaney: Facebook Is Google 10 Years Ago

The company had announced that starting with the 4Q financial reporting, it would disclose segment-wide numbers for “Google” and “Other Bets,” including capex, profitability and revenues.

Kessler expects Alphabet to report YouTube revenues in the $10 billion range for 2015, possibly with gross margins below 40 percent, largely driven by content costs. Gross margins for the core Google Search segment are estimated at over 85 percent.

“As such, we believe the decline Google has experienced in its gross/operating margins over the last few years is more about mix shift in areas including YouTube/Play Store vs. Other Bets,” Kessler added.

Image Credit: Public Domain

Latest Ratings for GOOGL

DateFirmActionFromTo
Feb 2021Loop CapitalUpgradesHoldBuy
Feb 2021Pivotal ResearchMaintainsBuy
Feb 2021JefferiesMaintainsBuy

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