The quarterly results from American tech behemoth Alphabet (Alphabet Stock Quote, Charts, News, Analysts, Financials NASDAQ:GOOGL) were good enough for Roth Capital Partners analyst Rohit Kulkarni to stay the course on the stock. Kulkarni reviewed Alphabet’s Q1 in a Wednesday report to clients and maintained a “Buy” rating and 12-month target price of $134.00, good at the time of publication for a projected return of 29.0 per cent.
Mountain View, California’s Alphabet announced its first quarter 2023 financials on Tuesday, coming in with $69.787 billion in revenue, up three per cent year-over-year, and net income of $15.051 billion compared to $16.436 billion a year earlier. Diluted EPS was $1.17 per share compared to $1.23 per share a year ago.
“We are pleased with our business performance in the first quarter, with Search performing well and momentum in Cloud. We introduced important product updates anchored in deep computer science and AI. Our North Star is providing the most helpful answers for our users, and we see huge opportunities ahead, continuing our long track record of innovation,” said CEO Sundar Pichai in a press release.
Revenue for the company broke down to $40.353 billion for advertising dollars from Google Search & Other, $6.693 billion for advertising in YouTube ads and $7.496 billion in advertising for Google Network. Google Other totalled $7.413 billion and Google Cloud’s revenue was $7.454 billion.
Kulkarni said the Q1 was a beat compared to Street estimates, with healthy revenue trends coming from Search and YouTube but partially offset by “better than feared” results from Cloud, where the $7.454 billion compared to $5.821 billion a year earlier.
On the negative takeaways from the Q1, Kulkarni said bears will be pointing to the small two per cent year-over-year increase in Search revenues, management’s projected increase in data centre and networking capex this year compared to 2022, a third consecutive quarter of YouTube ad revenue declines (negative three per cent year-over-year in the Q1) and, finally, weakness in Alphabet’s Search segment, related to declines in the company’s Finance and Media/Entertainment verticals.
The analyst said the conference call primarily focused on the company’s AI efforts, with Pichai saying the AI opportunity is similar to the transition from web to mobile.
“We see several potential catalysts over the near-term, Google I/O (May 10), Marketing Live (May 23), and the advertising industry’s Upfronts and Newfronts events scattered across May. We’d be buyers of GOOGL shares ahead of these catalysts, particularly on weakness below $100, implying ~15.0x ’24 P/E,” Kulkarni wrote.