Bring on the heavyweights. The Q2 earnings season will kick into high gear once the market action comes to a halt today, with one of the biggest names on Wall Street, Alphabet (NASDAQ:GOOGL), delivering its latest quarterly updates.
According to Wedbush analyst Scott Devitt, a 5-star analyst rated in the top 4% of the Street’s stock pros, investors are in for a strong readout from the Search giant.
“We think the setup remains positive heading into 2Q results with our ad survey and agency commentary pointing to continued strength for Google Search,” Devitt opined.
As such, Devitt expects a “more modest sequential deceleration in Search growth” and now sees Google Search revenue growth of 12.8% compared to 12% beforehand. This brings the anticipated Search revenue haul to $48.1 billion, compared to the prior forecast of $47.7 billion, which is 1% higher than the Street’s estimate. All told, Devitt expects consolidated Q2 year-over-year revenue growth of 13.1%, slightly above the consensus of 12.8%.
With cost controls remaining in place (such as streamlining and merging product teams, optimizing office space, and reducing the rate of headcount growth), Devitt anticipates further operating margin growth in the quarter, projecting an operating margin of 31.7%, compared to the consensus forecast of 31.1%. Devitt thinks Street expectations for near-term CapEx have “caught up to reality,” as the consensus estimate for 2024 CapEx has increased by approximately 33% since the beginning of the year.
While the risk for both Alphabet and all other Mega Cap internet names remains a “negative surprise related to spending,” the analyst thinks the chances for that happening this quarter are “relatively low,” given the “increased capital intensity is better understood and estimates for D&A (depreciation and amortization) and CapEx have risen materially following guidance last quarter.”
All told, ahead of the print, Devitt rates GOOGL shares an Outperform (i.e., Buy), backed by a $205 price target. Should that figure be met, investors will be pocketing returns of 12% a year from now. (To watch Devitt’s track record, click here)
Most analysts are on the same side as Devitt here. Based on a mix of 33 Buys vs. 6 Holds, the stock claims a Strong Buy consensus rating. Going by the $202.88 average target, in 12 months time, the stock is set to appreciate by 11%. (See Alphabet stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
