Alphabet Inc (NASDAQ:GOOG), Google’s parent company, announced its first-quarter revenue and earnings on Monday, beating Wall Street expectations.
The California-based company reported first-quarter net income US$9.93 per share on revenue of US$31.1bln versus consensus estimates of earnings of US$9.28 per share on revenue of US$30.3bln.
READ: Alphabet 1Q earnings and revenue top forecasts, but rising costs mute share reaction
Despite surpassing first-quarter expectations, analysts weighed in on their concerns.
Deutsche Bank analysts lowered the price target for Class A shares of Alphabet to US$1,225 from US$1,375 but reiterate a Buy rating. While the research note highlighted the company’s strong revenue, there’s the potential for volatility as margins decline. The European Union’s upcoming General Data Protection Regulation was listed as a downside risk.
“We expect more scrutiny from EU regulators around GDPR (as well as taxes and antitrust issues),” stated analysts in the note.
UBS analysts reiterated a Buy rating as well, maintaining a price target of US$1,360 on the shares. Analyst Eric Sheridan thinks that despite margin volatility, the market is undervaluing Alphabet shares, citing the company’s potential to lead in areas like cloud computing and autonomous driving.
KeyBanc analysts also lowered the price target to US$1,230 from US$1,280 and reiterated an Overweight rating following the quarterly report, according to a note reported on by TheFly.com. Despite the lowered price target, analyst Andy Hargreaves still sees value in the shares, citing the growth potential of its ad business and cloud software.
Alphabet’s price target was lowered at Barclays as well to US$1,250 from US$1,330 and analysts held an Overweight rating. The analysts noted that while revenue and earnings were above estimates, operating income missed estimates by 9%. Analyst Ross Sandler focused on the site’s revenue growth being ahead of expectations in the face of competition, but still maintains that the shares are oversold.
Bucking the trend, Morgan Stanley's Brian Nowak lifted his target for the shares to $1,200 from $1,175, citing the positive earnings surprise and the company's long growth runway and earnings potential. He kept his Overweight rating on the shares, per TheFly.com.
Alphabet was one of the many casualties on Tuesday's Wall Street sell-off, with shares down 4.6% to US$1,018.57.
--Updates for share price--