Google: Price Target Upgrade, CFO Move & New News Initiative

Jun 25, 2020
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As markets head towards the quarter's end, search engine giant Google's advertisement revenues have become the center of Wall Street scrutiny. Following data from research agencies that surfaced earlier this week and suggested that these earnings will drop for the first time in twelve years, a flurry of developments for the company and its parent Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) has taken place.

These paint a brighter picture for Google's advertisement revenues, with investment bank and research agency Baird Capital, financial services group Blackstone Group and Google itself making key decisions for the niche's future.

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In a blog post earlier today, Google's Vice President of Product Management Brad Bender laid out the details of a new program through which the company will pay news publishers for high-quality content. These payments will the part of the company's existing framework of providing access to news content under Google News and Search, and they will be made to local and national publishers in Germany, Brazil and Australia.

Naturally, any such payments will have to be generated from Google's revenue sources, which include the payments made to it by advertisers that are able to successfully target users with their material and from companies themselves who pay Google for placing content on the front page of its search engine.

To this end, Baird Capital has raised Alphabet Inc's price target by 10% to $1,650 today, as it cites optimism for the group's subsidiary Google's advertisement revenue. Baird analyst Colin Sebastian's survey of advertisement agencies suggests that an increase in time spent indoors and improved value for money has shown the tendency to improve ad revenues. Subsequently, Google's strong footing with its products will enable it to experience a stronger environment as time passes and global economies recover.

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Completing this trio of changes, Blackstone Capital announced today in a press release that Google's Chief Financial Officer Ruth Porat has joined the investment and financial services firm's board of directors. The move follows her engagement with Blackstone during the firm's initial public offering (IPO) and due to her extensive experience in the banking industry.

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While other big tech names have managed to pull off a U-shaped recovery in the stock market, Alphabet Inc's stock has lagged behind. Since the Class A and Class C shares reached new lows in mid-March, they are yet to trade at levels before the crash. Returns for NASDAQ:GOOG, while being higher than the SPX Year-to-Date and YoY, have still managed to miss the recent growth spurt exhibited by the index.

Heading into the earnings season, Google's advertisement revenues will be the key metric for investors and industry watchers to focus on. Their drop pulled down the company's performance in the first quarter of CY2020, and it came at a time when there was optimism for advertisement revenues to grow in the aftermath of the post-pandemic global lockdowns.

At the end of the quarter, Aphabet Inc posted $41 billion in revenue, which narrowed down to $6.8 billion in Net Income. Search and Youtube accounted for $30 billion of the total revenue as the March quarter exhibited year-over-year growth of roughly $5 billion.

Advertisement revenue had slowed down at the end of the March quarter, Alphabet's chief financial officer explained at the time, and should it grow in the future it will join the strong performance that YouTube, Cloud and Search exhibited at the start of this year.

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