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Alphabet (Google) share price rises to hit US$1tn market cap

The megacap stock just got bigger, thanks to a buying frenzy inspired by recent bullish price targets.

Source: Bloomberg

Shares of Alphabet Inc. (NASDAQ: GOOGL), the parent company of search engine Google, rose 0.76% to close at a historic high of US$1,450.16 per share on Thursday, 16 January.

This takes the company’s market capitalisation to one trillion US dollars, making it the fourth US company to do so, after Apple, Microsoft, and Amazon.

Higher price targets driving demand

The company’s share price has been boosted by higher analyst price targets in recent weeks, in anticipation of its Q4 earnings release on 03 February, as well as the recent appointment of new CEO Sundar Pichai.

Deutsche Bank analyst Lloyd Walmsley, for example, had raised his price target from US$1,550 to US$1,750 at the start of the week, stating that ‘the key medium term focal point this quarter will be any signs of a more shareholder friendly approach under the new leadership with Sundar Pichai taking over the Alphabet CEO job’.

Analysts at US investment banking firm Evercore had also increased their Alphabet share price target to US$1,600 from US$1,350, an 18.5% upside.

They predicted that Google’s global revenue will gain 18% in 2020, on the back of larger cloud and YouTube advertising revenue – two key growth industries in the US.

“The shift in large advertiser’s brand spend from TV to digital remains a secondary driver of digital ad spend growth,” Evercore said in a note.

Total volume of shares traded increased from 1,077,519 on 15 January to 1,304,040 on 16 January.

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Up next: 2019 holiday-quarter earnings

Share value could go even higher, with analysts expecting the search engine giant’s 2019 fourth quarter earnings to be in line with those of the first three.

Alphabet's top-line rose 22% in the Q3 and Q2, and 19% in Q1. Its ‘Google Other’ business segment, which include mobile, YouTube, and cloud computing, was a main driver of revenue growth.

The segment’s revenue expanded 39% year-on-year to US$6.4 billion in Q3, a key statistic that investors would be focusing on in the upcoming update.

For the fourth quarter, analysts are forecasting a revenue of US$46.9 billion, which would represent a 19.5% increase from the same period last year.

Still, Alphabet Chief Financial Officer Ruth Porat said during the company's Q3 earnings call that there is always a possibility of ‘variability in year-on-year revenue growth rates from quarter-to-quarter as we've often discussed’.

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