Wedbush says owning Alphabet for Cloud like rooting for Jordan to play baseball

Wedbush analyst Scott Devitt notes Alphabet reported mixed Q3 results as revenue of $76.69B was 1.2% above Street expectations while operating income was 1.1% below estimates. The firm thinks shares are pressured after hours for two primary reasons, namely uncertainty related to the trajectory of Cloud revenue growth following lackluster Q3 results, and incrementally lower expectations for future margin expansion as Q3 operating margin was 60bps below consensus. “Owning Alphabet for its Cloud business is like rooting for Michael Jordan to play baseball,” Wedbush argues. The firm thinks the reaction in shares after-market is overdone and believes investors are placing too much relative value on the company’s Cloud segment which accounts for just 11% of revenue and 1% of operating income. Wedbush has an Outperform rating on the shares with a price target of $160.