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Alphabet Is Still In Very Early Stages, Morgan Stanley Says

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Alphabet Is Still In Very Early Stages, Morgan Stanley Says
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Exiting Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)'s earnings report Monday afternoon, MOrgan Stanley said one thing is clear -- the company is still in its very early stages.

The Analyst

Morgan Stanley's Brian Nowak maintains an Overweight rating on Alphabet's stock with a price target lifted from $1,250 to $1,325.

The Thesis

Alphabet's earnings report offered five signs to suggest Alphabet's growth profile is still in its early ages, Nowak said in a note.

  1. The company's already large $85 billion annualized Websites business saw accelerated growth which affirms management's focus on innovation and the user experience.
  2. Alphabet continues to find ways of monetizing existing businesses, including YouTube subscriptions which could drive 13 times higher user monetization. In addition, under-monetized platforms like Maps could generate $2 to $3 billion of new annualized revenue.
  3. Alphabet continues to focus on the international market and new opportunities such as the Tez platform in India. As a whole, APAC and EMEA regions accounted for just 2 percent, or $310 million, of total revenue which implies a very bullish opportunity for growth ahead.
  4. Waymo is on track to launch a ride-hailing service this year and the unit is a "key part" of the long-term story.
  5. Alphabet showed in its earnings report a 4 percent EBITDA beat at a time when the company is also "investing harder than ever" to extend its advantage, including the addition of four thousand new employees.

Price Action

Shares of Alphabet's Class C GOOG stock was trading higher by nearly 4 percent early Tuesday morning.

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Jul 2018Raymond JamesMaintainsOutperformOutperform
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Jul 2018Cowen & Co.MaintainsOutperformOutperform

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