MKM Partners Raise Target Prices For Top Tech Stocks
According to Rob Sanderson, an analyst at MKM, three technology stocks which include Twitter, Facebook and Alphabet will appreciate by double digits in the next one year. In the case of Alphabet, Sanderson gave the stock a buy rating and forecast that it will hit $1210 per share in one year based on the fact that its revenues will continue to grow.
Sanderson pointed out that revenue contributions from YouTube in the last quarter were unnaturally low as a result of advertising disruptions after various organizations pulled out their ads due to the prevalence of extremist content on the video-sharing platform. At $1210 per share, Alphabet would have to appreciate by 28% as it currently stands at $945.
“We are raising our EPS forecast on higher revenue and slightly lower margin. We are raising our 12-month target to $1,210 using the same 23x core Google earnings plus cash and 4x revenue for Other Bets,” wrote Sanderson in a client note.
Sanderson also cautioned that there were material risks that Alphabet face and this included the potential for getting slapped with more fines in Europe. Two months ago Alphabet incurred a fine of $2.7 billion for violating antitrust laws.
With regards to Facebook, Sanderson also gave the stock of the social media giant a buy rating forecasting that the share will appreciate by 18% to reach $200 per share from the current $180. The MKM analyst pointed out that investors in the Palo Alto, California-based social media giant were now less worried that the growth rate decline was now more manageable. Sanderson also acknowledged that a slower rate of growth in Facebook’s advertising revenues was inevitable though different pricing models will help offset it.
Q2 earnings report
After reporting earnings for the second quarter last month, Facebook revealed that despite the number of monthly visitors increasing to two billion, there would be a slowdown in ad impression and ad-load growth. Facebook also predicted that its spending would rise.
Unlike in the case of Alphabet and Facebook, Sanderson gave Twitter a neutral rating though he projected that the stock of the microblogging firm would appreciate to $18 from the current $16 per share. Sanderson based this on the view that there was a growing improvement in user engagement. The MKM analyst also noted that Twitter was known for offering guidance that was usually too conservative which raised the possibility of the microblogging service delivering earnings that would surpass estimates.