Cantor Still Buying Alphabet Into Thursday's Earnings Release; Sticks With $975 Target

Cantor Fitzgerald’s Youssef Squali expects Alphabet Inc GOOGL to report robust 1Q16 results on April 21.

The analyst maintained a Buy rating on the company, with a price target of $975.

1Q Drivers

Squali believes that Alphabet’s 1Q results would be in line with the above consensus estimates, “driven by Search and Display on O&O sites in the U.S., with continued momentum from mobile search, programmatic, and video.”

The analyst also expects FX to have offered a slight tailwind in 1Q16 from the headwind in 4Q15.

In addition, Alphabet’s “recent addition of a fourth link at the top of the page on desktop-based queries should also provide some tailwind,” Squali mentioned.

Google Web Sites is likely to have been the key driver of revenue growth for the company, with the business’ gross revenue expected to have increased 24 percent year on year during 1Q.

SERP Changes & Capex

The analyst also pointed out that the changes made to Google’s desktop search engine results page (SERP) have completed more than six weeks.

Although it might still be early to fully assess their impact, Squali believes that the changes have only had minor impacts so far, such minimal impact on traffic and overall search CPCs.

However, the Cantor Fitzgerald report pointed out, “With heavy investments needed in areas including GCP and Other Bets, Google's capex is likely to remain elevated.”

Although Alphabet is not expected to provide any guidance, the consensus expectations for 2Q16 imply robust growth going forward, Squali added.