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MKM Lowers Alphabet's Target To $930: Despite Being A Laggard, Google's Mobile Segment Is Huge

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MKM Lowers Alphabet's Target To $930: Despite Being A Laggard, Google's Mobile Segment Is Huge
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Amid volatility, Alphabet Inc (NASDAQ: GOOGL) shares have lost 8 percent year-to-date. MKM Partners’ Rob Sanderson maintained a Buy rating for the company, while reducing the price target from $950 to $930. The analyst expects Google to be “a driving force” causing a shift in ad budgets from traditional media to digital platforms.

Shares are down 6.7 percent since the company’s last report, versus a 3.6 percent decline in the NASDAQ. Although the stock has been a laggard, the Mobile segment is a “major driver” and “the trend is early,” analyst Rob Sanderson noted.

Ad Allocation Shift

According to MKM’s tracking of US ad revenue of the top-15 platforms, total ad dollars accelerated to 15 percent over the last two quarters, from 9-10 percent a few quarters ago. Internet allocation increased 487bps year-over-year in Q1, marking the lowest gain since 1Q15. Despite the increase in Facebook Inc (NASDAQ: FB) over the past few years, Google still attracts more than two-thirds of the US Internet advertising spend, Sanderson mentioned.

“The shift of ad dollars to mobile and to programmatic platforms are inflators of traffic acquisition costs to GOOGL. We believe that both trends are bringing significantly more ad dollars and are positive for the company,” the analyst wrote.

The EPS estimates for 2016 and 2017 have been reduced by 4 percent to $34.00 and by 2 percent to $40.30, respectively, to reflect higher TAC.

Latest Ratings for GOOG

DateFirmActionFromTo
Jan 2017Pacific CrestReinstatesOverweight
Jul 2016JP MorganMaintainsOverweight
Apr 2016Deutsche BankMaintainsBuy

View More Analyst Ratings for GOOG
View the Latest Analyst Ratings

Posted-In: MKM Partners Rob SandersonAnalyst Color Long Ideas Price Target Reiteration Analyst Ratings Trading Ideas Best of Benzinga

 

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