Here’s what major analysts expect from Alphabet earnings after the bell

Analysts are turning their attention to another so-called FANG stock as Alphabet reports after the bell Monday. Most remain bullish and expect Alphabet to be carried by strong advertising revenue. Other things analysts will be watching for include key metrics on search, Youtube, Waymo, and any comments on regulation.

Shares of the internet giant rose more than 1.5 percent to $1131.56 on Monday, bringing its gain for the year to 8 percent.

Barclays Ross Sandler thinks Alphabet’s stock performance could be something to watch, saying, “We think 2019 could be a better year for GOOGL shares than 2018’s flat performance.”

Baird analyst Colin Sebastian calls Alphabet a top pick for the year and believes cloud expansion, YouTube growth and strong search during macroeconomic headwinds will help the stock this year.

Under new Google cloud boss Thomas Kurian, Sebastian expects a, “meaningful acquisition,” and that a “Flexible balance sheet allows Google Cloud to go elephant hunting.”

Some analysts were more cautious than others.

“We have somewhat greater concerns about growth into 2019 due to Amazon’s ad business and GOOGL’s large base,” said J.P. Morgan’s Doug Anmuth, who is staying overweight into Alphabet’s earnings report regardless.

Justin Post from Bank of America has a few concerns, but “overall, we like the set up into the print given Amazon and regulatory concerns, margin comps, valuation and YTD stock underperformance..”

In his preview cheat sheet note to clients, RBC’s Mark Mahaney said, “We believe Street estimates for Q4 are relatively reasonable on both the top line and the bottom line.”

Here’s what else analysts expect:

J.P. Morgan – Overweight rating

“GOOGL’s growth has been resilient at 20%+ & we view GOOGL as less controversial than other FANG names, but there is also less overall excitement around the shares given uncertainty on the timing of GOOGL’s next big revenue driver (Waymo in our view) & lack of visibility into margins…While we have somewhat greater concerns about growth into 2019 due to AMZN’s ad business & GOOGL’s large base, we remain Overweight on GOOGL shares based on: 1) High teens top-line growth expectations, continued to be led by mobile & YouTube; 2) Solid profitability & FCF w/Google Segment GAAP operating income margin of 27% in ’18 & 26% in ’19; 3) A tighter range of financial outcomes based on core advertising resiliency; 4) Waymo’s potential as the leader in AV; & 5) Attractive valuation…”

Bank of America- Buy rating

“Direct response ad checks are generally positive in the US, but we think some Intl macro pressure is possible…Overall, we like the set up into the print given Amazon and regulatory concerns, margin comps, valuation and YTD stock underperformance… Top items for the call: core ad rev growth, core margins.. Key items include: 1) Google Website ex-FX growth trends; 2) expense trajectory given depreciation, hardware and YouTube content ramp; 3) traffic acquisition cost growth trends and outlook; 4) any commentary on General Data Protection Regulation or other regulatory impact on revenue; 5) new ad products, features, and content at YouTube; 6) Google Cloud progress; and 7) updates on Waymo…”

Goldman Sachs- Buy rating

“Our advertiser checks point to continued strength in mobile search and Shopping ads during the holiday shopping season… North America spending growth remained constant from 3Q according to checks with the most highly correlated partners… UK partners pointed to country-specific issues driving softer commentary, though we note the UK represented 8% of revenue the last time the company disclosed it (1Q17)… We are modeling total Alphabet revenue of $39.3bn or +21% y/y (+22% constant currency) versus FactSet consensus of $39.1bn (+21% y/y) and which compares to constant currency growth of 22% in 3Q18…”

Credit Suisse- Outperform rating

“Given Google’s scale, perceived maturity of Websites growth, coupled with an ongoing appetite to underwrite longer duration opportunities, investors often ask us what will get GOOGL shares moving in 2019. Our answer is the following: 1) FCF growth inflection affirmed in 4Q18 and 1Q19 results as CapEx settles at a new normalized rate of ~$5.5b per quarter, implying FCF growth acceleration in 1Q19, 2) new ad product benefits from Responsive Search Ads as well as other new products Google rolled out in mid-2018, 3) upward bias to Websites growth due to the ongoing adoption of Smart Bidding, as well as our checks indicating a heavier investment stance among advertisers/merchants for traffic acquisition..We expect these aforementioned developments to serve as validation of our investment thesis which remain rooted on the following: 1) ongoing monetization improvements in Search through product updates, 2) larger-than-expected contribution from Google’s larger non-Search businesses 3) optionality for value creation from new monetization initiatives such as Maps as well as the eventual commercialization of Google’s Other Bets (Waymo, Life Sciences)…”

Barclays- Overweight rating

“We expect another largely in-line print from GOOGL, and would add to positions here… We see a reasonable chance that the pace of operating margin implosion at Google could ease a bit, especially evident in the COGS line, starting this quarter. Now that Sites and L+O are closer to the same growth cadence, the pace of deleverage from mix shift to lower margin business units may be less pronounced than in the past… Looking at 2019, margins should also benefit somewhat from lapping performance fees (in G+A), offset by heavy investments across the board and mix shift… The last time GOOGL saw margins stabilize after a prolonged period of decline was early 2015, which set the stage for a 50% rally in shares; hence, we think getting ahead of this possible trend is a good idea..We think 2019 could be a better year for GOOGL shares than 2018’s flat performance…”

Baird- Outperform rating

“We remain constructive on Alphabet into earnings, as checks with advertisers and 3P marketing partners were consistently healthy through the holiday period… We believe Street expectations for revenue/EPS are reasonable, although we note that a mix towards hardware and investments in cloud and video headcount/infrastructure will remain a drag on margins… Overall, Alphabet remains a top 2019 pick, with potential catalysts including: 1) Cloud segment expansion/acquisitions; 2) YouTube growth/online video gains; 3) resiliency of Search in questionable macro environment; and 4) Other bets/Waymo headlines..Flexible balance sheet allows Google Cloud to go elephant hunting… Given GCP’s third-place market position and incoming leader Thomas Kurian’s background in enterprise software, we continue to see increasing likelihood of a meaningful acquisition to enhance enterprise sales/support functions and SaaS capabilities, and close the competitive gap with Azure and AWS..”

RBC- Outperform rating

“Key Items to Focus On: 1) We are looking for Core Google Gross Revenue of $38.72B and Net Revenue of $31.23B, driven by ongoing strength in Mobile Search, YouTube and Programmatic…We are also looking for $10.07B in Core Google GAAP Operating Profit… 2) Gross Google Properties Revenue: Within Core Google is Google Properties Revenue which includes core Search and YouTube… We are looking for $26.82B in Gross Google Properties Revenue, 3) Revenue for Google Other: We are looking for $6.31B in Google Other Revenue, which would represent 27% Y/Y growth and 36% Q/Q growth, largely driven by Q4 Hardware Revenues… Google Other Revenues includes Hardware, Play, and Cloud… 4) In terms of TAC, we are generally modeling muted ongoing growth..”

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