Evercore sweetens price target for Alphabet Inc (NASDAQ:GOOG) to $915

Analysts at Evercore are now more confident in Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) growth and profitability prospects than they demonstrated in the previous note. As such, the analysts maintain a Buy rating on Alphabet and have increased their 12-month price target on the stock to $915 from $840. The move is, among other factors, predicated on comparable multiples, standalone DCF and Alphabet’s some of the parts or SOTP.

In addition to boosting price target for Alphabet Inc (NASDAQ:GOOG), Evercore has also assigned lofty valuation to the company’s various properties.

Alphabet’s parts and valuation estimates.

YouTube – $85 billion

Evercore has assigned a valuation of $85 billion on Alphabet Inc (NASDAQ:GOOG)’s YouTube. The firm, among other things, believes there is more headroom for YouTube monetization given that it thinks Alphabet currently extracts just about $7 per user in revenue from the digital video platform.

YouTube has about 1.3 billion MUAs and its ARPU of $7 is nearly in-line with Twitter Inc (NYSE:TWTR)’s ARPU, but below Facebook Inc (NASDAQ:FB)’s $11.  Netflix Inc (NASDAQ:NFLX)’s ARPU is in the vicinity of $106.

Evercore predicts revenue of $4.4 billion for YouTube this year with the metric expected to grow at CAGR of 25% over the next five years to reach $33 billion by 2021.

Display Network

For Alphabet’s Display Network, Evercore has a $20 billion valuation on it and has $2.5 billion net revenue estimate on the business for 2016.

Other Bets

Evercore has assigned $4.4 billion valuation of Alphabet’s Other Bets or experimental businesses, which include Nest, Fiber and others.

 

Core Search

As for Alphabet Inc (NASDAQ:GOOG)’s core Search business, Evercore values it at $450 billion.

4Q estimates

For the current quarter, Evercore is more optimistic of Alphabet Inc (NASDAQ:GOOG)’s topline growth than most other Wall Street analysts. As such, the firm’s 4Q revenue estimate of $16.96 billion is at least 1% above the consensus estimate.

On Alphabet’s profitability, Evercore’s estimates are in-line with the consensus target of EPS of $8.10, mainly because it believes higher expenses will while some bottom-line benefits.

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