Alphabet A: Color on Qtr (891.44)
- Pivotal Research notes Alphabet reported another quarter featuring better-than-expected metrics on revenue growth, expense management and capital expenditures. Longer-term expectations are raised slightly. Firm continues to rate the stock Hold. Company provided new disclosures on regional revenue breakouts. On a constant currency basis, the US (48% of revenue) rose by +25%, EMEA (33% of revenues) grew by +19%, APAC (15% of revenues) expanded by +26% and Other Americas outside of the US (5% of revenues) gained +29%. As a subset of EMEA revenues, the UK (8% of total revenues) was up +16%. Looking at costs, TAC to network members rose to represent 70.5% of network revenue -- marginally higher vs. recent levels, but still the highest for any quarter since 2009.
- RBC Capital raises tgt to $1050 from $1025. Key Positives were: a) Impressive top-line growth, b) Stabilization in Core Google Operating Margins, and c) $1.1B Share Repo. Q1 Keys: (1) Robust & Consistent Revenue Growth: 24% Y/Y Organic Rev growth matched Q4's robust rate, while 20% Y/Y Ad growth (ex-FX) accelerated 1pt. (2) Expanding Op Margin: Non-GAAP Op Margin of 42.6% was up 110bps Y/Y, while GAAP Op Margin was up 20bps Y/Y to 32.6% despite the increased SBC. (3) Mobile Impacts Clicks & CPCs: 44% Y/Y Paid Click growth is the highest in a decade with particular strength in Google Sites (record-high 53% Y/Y); overall CPCs, however, decline of (19%) Y/Y. (4) Higher Overall TAC: 10.4% of Google Sites (up 60bps Q/Q) was a new high, as was the 70.5% at Network (up 90bps Q/Q); overall TAC remained at 21.6% of Total Ad Rev. This was the negative.
- Wedbush raises tgt to $725 from $700. Solid beat in seasonally small 1Q takes up firm's estimates and PT, but Sites TAC pressures keep building, and results are too early to reflect traction of newer ad products of an AMZN or quality challenges for YouTube in pulling from TV. Recent advertiser pullbacks from YouTube were likely too recent to affect 1Q growth, and, more importantly, its progress against TV depends more on upcoming advertiser negotiations. Wedbush's view remains that incursions by other FAANG companies into search are likely to have a detectible impact by 2018.