Based on comps, Justin Post of Bank of America Merrill Lynch estimated YouTube’s stand-alone valuation potential at $90 billion.
Post maintained a Buy rating on Alphabet Inc GOOGL, with a price target of $925.
YouTube Momentum
The analyst believes that YouTube momentum would be a key driver of the growth of Google Website.
“While not disclosed, we are raising our YouTube revenue estimates based on TTM management commentary on usage/partner revenue growth, and estimate YouTube will add 4pts of growth to Google Website revenues in 2016, helping offset deceleration in search,” Post mentioned.
Internet video views have doubled from 2015 to 2016, with video expected to account for 80 percent of all mobile Internet traffic by 2019.
YouTube To Drive Growth
According to the Bank of America report, “Google indicated growth in watch time on YouTube has accelerated and is up at least 50 percent year over year for three straight years.”
Post expects video advertising to grow in line with usage, with worldwide online video advertising spend expected to rise $19 billion from 2015 to reach $35 billion in 2018, which would create a huge opportunity for video content platforms.
Based on online video ad market growth, which in turn has been driven by new content, increasing mobile usage and faster Internet speeds, the gross revenue estimate for YouTube for 2016 has been raised from the earlier $10.4 billion to $12 billion, while the estimate for 2018 is $20.4 billion.
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