Alphabet higher as Mizuho raises target, Morgan Stanley weighs value of parts

Jan. 25, 2021 10:15 AM ETAlphabet Inc. (GOOG)GOOG, GOOGLBy: Jason Aycock, SA News Editor2 Comments
  • Alphabet is higher today (GOOG +0.8%, GOOGL +0.6%]), pursuing its fifth straight day of gains, after a price target hike at Mizuho, which is looking toward a rebound in several verticals in online advertising.
  • Higher demand is likely to drive positive pricing in areas including retail, financial services and travel, analyst James Lee says. U.S. search revenues for the fourth quarter are tracking ahead of consensus, he says.
  • And that calls for a higher multiple given the cyclical recovery, he notes.
  • The firm raised its target on GOOGL to $2,100 from $1,810, implying 10% upside.
  • Meanwhile, Morgan Stanley has reiterated its Overweight rating and $2,050 price target. And with regulators pursuing multiple antitrust actions that could end up with breaking up the company, analyst Brian Nowak dug into valuing the parts.
  • He's concluded that sum-of-the-parts suggests a $2,800 valuation, about 50% upside.
  • That's made of a mobile search business he values at $705B; desktop search annuity at $300B; YouTube's ad business, valued at $365B; Google Cloud opportunity at $330B; and Waymo opportunity at $105B.
  • He's also leaving out of the analysis areas with potential value including "YouTube Subscriptions (YouTube Premium/YouTube TV), Stadia, Verily, Calico, Google Fiber, Wing, DeepMind, X, as well as venture capital units GV and CapitalG."

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