Mizuho Raises Google's Price Target On Positive Ad Trajectory

A recent call with a leading advertising agency indicates a monthly recovery for Alphabet Inc GOOGGOOGL in the second quarter and a positive trajectory of ad revenues ahead, according to Mizuho Securities.

The Google Analyst: James Lee maintained a Buy rating on Alphabet, while raising the price target from $1,650 to $1,750.

The Google Thesis: Although the agency’s data suggested Google’s U.S. search ad revenue growth had decelerated from 11.4% last quarter to 8.6% in the second quarter, the company made a good recovery from 4% in March to 9% in April and 11% in May, Lee said in the note.

This recovery is attributed to rising demand for consumer packaged goods, checks for the government’s stimulus plans and consumers stocking up in certain product categories.

Google’s clicks growth spiked from 9% in the first quarter to 39% in the second quarter, Lee mentioned. He said the agency attributed this strength to users spending more time on Google amid lockdowns and people working from home.

Despite a significant pickup in impressions and clicks, cost-per-click declined by 22% versus 2% growth in the prior quarter.

Lee sees a positive trajectory into the back half of the year and for Google website revenues to grow by 4% to $171 billion by fiscal 2022. Referring to the long-term thesis, he wrote that Google remains “a positive structural story on penetrating TV advertising, improved monetization for Maps and newly introduced Discover ads, and cloud opportunities.”

GOOGL Price Action: Shares of Alphabet traded around $1,565 at the time of publication Tuesday.

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