Google parent Alphabet reported stronger-than-expected 4Q results, fueled by higher advertising revenue and strong demand for its cloud services. Shares of the tech giant surged 7.6% in Tuesday’s extended trading session.
Alphabet’s (GOOGL) 4Q earnings surged 45.3% to $22.30 per share year-over-year and beat Street estimates of $15.90. Total revenue jumped 23% to $56.9 billion and surpassed the consensus mark of $53.1 billion.
Sales at Google’s advertising segment soared 21.8% to $46.2 billion year-on-year as a recovery in consumer and business activities drove Search and YouTube revenues higher. Google Cloud sales increased 46.6% to $3.8 billion. (See Alphabet stock analysis on TipRanks)
Following the results, Stifel Nicolaus analyst Scott Devitt lifted the stock’s price target to $2,025 (5.5% upside potential) from $1,700.
Devitt said, “Alphabet continues to drive growth at scale through strength in mobile search, YouTube, and programmatic advertising, while investing in other key initiatives (cloud, hardware, AI [artificial intelligence]) that should serve as multi-year growth levers.”
The analyst added that “We recommend GOOGL shares given supportive valuation on normalized EPS and confidence in the company’s long-term growth opportunity.”
However, he maintained a Hold rating saying that “in the near-term, we expect the advertising industry to be meaningfully impacted by COVID-19 measures.”
Overall, the Street has a bullish outlook, with a Strong Buy consensus rating based on 15 Buys and 2 Holds. The average analyst price target of $2,067.88 implies upside potential of about 7.8% to current levels. Shares have gained 33.9% in the past year.