- Michael Levine, an analyst at Pivotal Research Group, on Monday upgraded Alphabet to “buy” from “hold” and increased his price target to $US1,650 from $US1,445.
- Shares surged nearly 3% to a new record high in early trading Monday.
- “We are incrementally more constructive about what we perceive as multiple ways to get paid under the recently appointed Pichai regime,” Levine wrote in a note Monday.
- Watch Alphabet trade live on Markets Insider.
Shares of Alphabet rose nearly 3% on Monday to a new record high after Michael Levine, an analyst at Pivotal Research Group, upgraded the stock to “buy” from “hold.”
Levine also raised his price target to $US1,650 from $US1,445, roughly 21% higher than where shares of the Google parent company closed trading Friday. The updated price target is now the second-highest on Wall Street after Stephen Ju of Credit Suisse, who has a price target of $US1,700 on the equity.
“We are incrementally more constructive about what we perceive as multiple ways to get paid under the recently appointed Pichai regime,” Levine wrote in a note Monday. He’s evaluating the company based on 12.5x its 2021 Ebitda and said that multiple could easily move higher depending on “actions the new regime could, and should, pursue.”
Sundar Pichai became the CEO of Google and its parent company Alphabet on December 20 following the departures of cofounders Larry Page and Sergey Brin. The change at the top of Alphabet offers “the most optionality for multiple expansion for the stock we have seen in years,” Levine wrote.
Under Pichai, there’s an opportunity for incremental disclosure, a change in guidance philosophy, and a potential to change capital allocation strategies, such as instituting a dividend, Levine wrote.
He also highlighted other positive factors at the company, including Thomas Kurian at the helm of Google Cloud.
“Our view is that Thomas Kurian’s hiring is akin to Kieth block being hired at CRM in 2013 – another multi-decade senior ORCL hire who has radically changed the CRM culture and business for the better,” Levine wrote. The journey will likely take time, however, Levine wrote, as Kurian is just getting started, and Amazon and Microsoft have “substantial leads” in cloud over Google.
Leadership aside, Levine said that Google’s revenue growth from ads is encouraging, making the company “likely the safest and cleanest of the large cap names to own through at least the second-quarter 2020 print in July.”
Analysts have a consensus price target of $US1,455.92 on shares of Alphabet, and 40 “buy” ratings, five “hold” ratings, and zero “sell” ratings, according to Bloomberg data.
Alphabet gained 28% in 2019.