Shares in Alphabet (GOOGL) spiked 8% in after-hours trading following the release of the tech giant’s first quarter earnings results. Revenue surged 13% year-over-year to $41.16B, easily beating the Street forecast of $40.2B, although Q1 Non-GAAP EPS of $9.87 missed the consensus forecast by $0.89.
As expected, the fallout from the coronavirus pandemic saw YouTube advertising revenue drop 14% compared to the previous quarter, but on a year-over-year basis the figure was still up over 33%.
“Our business, led by Search, YouTube, and Cloud, drove Alphabet revenues to $41.2 billion, up 13% versus last year, or 15% on a constant currency basis,” commented Ruth Porat, CFO of Alphabet and Google. For instance, Google Cloud recorded $2.8B in revenue, up 52% year-over-year.
“Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues” Porat said.
To offset the lower ad revenue, she told investors that GOOGL is “sharpening our focus on executing more efficiently, while continuing to invest in our long-term opportunities.”
Following the report, RBC Capital analyst Mark Mahaney boosted his GOOGL price target from $1,350 to $1,500 while ramping up estimates. In particular, the analyst now sees 2020E Gross Revenue up 14% to $177B, with EBITDA rising 19% to $58B.
“We do view the GOOGL Long Thesis as well intact and would expect fundamentals (esp. Search ad revenue) to snap back when the economy recovers” he cheered, calling Alphabet ‘a top rebound stock.’
Indeed, GOOGL scores a firmly bullish ‘Strong Buy‘ outlook from the Street. Out of the 38 analysts polled by TipRanks in the last three months, 37 rate the stock a ‘buy.’ Meanwhile the average analyst price target of $1,499 indicates a further 20% upside from the current share price. So far, year-to-date the stock has posted a loss of 8%. (See GOOGL stock analysis on TipRanks).