Alphabet Inc Stock Price Targets Boosted As Analysts Defend Earnings

Analysts from multiple firms raised their price targets for Alphabet stock following last night’s earnings report, causing the stock to rally after investors pushed shares lower right after the print. It seems they’re trying to do damage control after widespread headlines that the company had missed estimates for the bottom line. A change in the company’s accounting procedures apparently is causing some confusion.

Alphabet stock to $1,000: Morgan Stanley

Morgan Stanley analyst Brian Nowak raised his target for Alphabet stock to a nice round $1,000 per share. The Google parent company reported adjusted earnings of $9.36 per share, compared to the consensus of $9.64 per share. However, after making further adjustments, Nowak says that the company would have reported $10.05 per share, excluding equipment charges, a one-time tax headwind, and other one-time charges.

He notes that the amounts of some of these one-time charges are unclear and that it’s not uncommon for Alphabet to income such charges below the line. However, he said based on fundamentals, the result was still better than expected.

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Another key bullish point was that Websites revenue increased 23%, which was more than expected, and adjusted EBIT beat Nowak’s estimate by 9%, excluding some of the other charges he added in. He also spoke to the suggestion that the company’s core margin pressure was worsening, but he doesn’t think this is necessarily the case, even with the introduction of the Pixel phones. Again, this goes back to the one-time charges he includes that Alphabet didn’t.

Deutsche Bank analysts peg Alphabet’s adjusted earnings higher than Nowak, at $10.30 per share after making their own adjustments and factoring in the 4.2% higher tax rate.

Alphabet stock target to $1,050: Stifel

Deutsche Bank analysts peg Alphabet’s adjusted earnings higher than Nowak, at $10.30 per share after making their own adjustments and factoring in the 4.2% higher tax rate.

Stifel analyst Scott Devitt boosted his price target for Alphabet stock from $950 to $1,050 per share after last night’s print. He continued the Wall Street narrative that the company actually beat consensus for non-GAAP earnings based on one-time adjustments. He merely described it as “comfortably above the Street if Alphabet has excluded the previously mentioned $320mm in one-time costs.”

Among the other analysts who boosted their price targets for Alphabet stock is Macquarie’s Ben Schachter, who moved his target from $975 to $995 and pronounced the fourth quarter report “mostly fine, more of the same.” Also Baird analyst Colin Sebastian raised his target for Alphabet stock from $930 to $960. He’s also of the view that the company’s non-GAAP earnings were better than what the headlines suggest and noted “surprisingly strong” revenues from the “Other” segment, which points to momentum in the Cloud, contributions from Play, and early success from the Pixel line, Home hardware products and other inclusions.

Alphabet’s earnings a negative sign for Facebook?

Bank of America Merrill Lynch analysts also agree with the view that Alphabet’s adjusted earnings should be considered a beat despite the headlines. They note that the company didn’t state what the $320 charge was for and that it said it will no longer exclude stock-based compensation from its non-GAAP earnings, which is a key change.

On a side note, they’re concerned that Alphabet’s earnings could be a bearish signal for Facebook which suggests that expectations could be too high. The reason is because Google Websites revenue didn’t match their “more bullish channel checks.”

Shares of Alphabet stock bounced around during regular trading hours on Friday, plunging before bouncing around midday to trade at around $851.