The search giant continues to expand and, while search is king, the cloud presence is growing fast. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
Back in the fall, Google outlined expanding capabilities to facilitate commerce, capitalizing on the “treasure trove” of data provided by seven different properties, each with at least a billion active users (Android, Search, Chrome, Maps, Play, YouTube and Gmail). Smart shopping campaigns leverage machine learning to make sense of touch points along the consumer purchase path, including better offline attribution capabilities (locally oriented searches up 200% over past two years) and improved purchase conversion rates (20% on average).
Jefferies said this about the company:
Core search/ad strength continues with upside potential from YouTube, Cloud, and other bets. Look for additional disclosures to be a catalyst. The stock trades in-line with the S&P 500 at ~11 times 2019 EBITDA despite >2x 2019 revenue growth (18% vs. 7%) and >2x EBITDA margins (46% vs. 20%).
The Jefferies price target is $1,450, and the consensus target is $1,349.28. The shares closed Wednesday at $1,081.65, so the Jefferies target represents 34% upside.
This is another top Jefferies pick with big upside to the target price. IAC/InterActiveCorp (NASDAQ: IAC) operates a diverse collection online media assets ranging from search to personals, with Ask.com and Match.com driving the bulk of its revenue and profits. IAC generates revenue from a combination of advertising (both search and display), subscriptions and transactions.
The 2017 merger between Angie’s List and Home Adviser, IAC’s home services marketplace, was well received. The Jefferies analysts are very positive on the company and noted this:
This conglomerate is trading at a ~$1.5 billion discount to its ownership in Match.com and Angies List and at just 14x 2019 EBITDA. Impressive track record that does not get enough credit.
Jefferies has set its price target at $240. The consensus target is $239.71, and the stock closed most recently at $185.31. So the upside to the Jefferies target is right at 30%.
Two mega-cap industry leaders and two smaller plays for investors who feel that the internet remains the ubiquitous ruler of almost everything for today and tomorrow. While much better suited for aggressive growth accounts, these stocks offer solid entry points with the market still down big from highs set in the fall.
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