Why Bob Peck Is Still Buying Alphabet Shares Heading Into Q2 Earnings

Alphabet Inc GOOGL is scheduled to announce its 2Q results on July 28. While expectations are modest, the stock valuation appears fair, SunTrust Robinson Humphrey’s Robert S. Peck mentioned in a report. He maintained a Buy rating on the company, with a price target of $850, saying that following the recent pullback, the shares now reflect potential near-term risks.

Search Trends And Comps

Third-party data suggests a y/y softening of search revenue trends in 2Q, analyst Robert Peck stated. He added that several other providers have indicated the same and this seems to have been “at least partially” discounted by investors.

On the comp front, one of the concerns is that there was an upturn in US business in 2Q15, driven by stronger performance in branded keywords, increased traffic and monetization on YouTube, and programmatic. Moreover, “3Q/4Q will lap the addition of the 3rd link on mobile,” Peck wrote.

Modest Trimming Of Estimates

The US dollar was weaker on average during 2Q16 versus the prior year. Also, Brexit makes forecasting difficult, with ~9 percent of revenues being generated in the UK and more than 20 percent in Europe. “Further, we believe FX volatility could begin to impact the discretionary ad budgets for multinational corporations,” the analyst stated.

The EPS estimates for 2Q and FY2016 have been reduced from $8.00 to $7.89 and from $33.16 to $32.82, respectively.