Global Markets: Alphabet set to open at record high; mobile ads drive revenue

New revenue streams such as mobile and video advertising should continue to propel earnings of Google parent Alphabet Inc (GOOGL.O), whose shares were set to open at a record high on Friday following better-than-expected results, analysts said.

The company's search traffic on mobiles surpassed desktop traffic worldwide for the first time in the latest quarter.

Alphabet's shares were up nearly 10 percent at $746.95 in premarket trading, far above the $713.33 record high set by Google - the company's former name - in regular trading in July.

A 10 percent rise equates to about $46 billion in market value. This would give Alphabet a market cap of about $519 billion, cementing its position as the second-most valuable stock after Apple Inc (AAPL.O), worth about $660 billion.

Shares of Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O), which also posted better-than-expected quarterly results on Thursday, also jumped in premarket trading, pushing up U.S. stock index futures.

At least 14 brokerages raised price targets on Alphabet's stock on Friday. J.P. Morgan and Jefferies were the most bullish, both raising their targets to $900.

"We think it's not long before mobile clicks surpass desktop, which we expect will provide a nice tailwind to cost-per-clicks, magnified by a tighter gap between mobile and desktop ad pricing," J.P. Morgan analyst Doug Anmuth said.

Alphabet said the number of paid clicks, which require advertisers to pay only if a user clicks on the ad, rose 23 percent, compared with 18 percent in the previous quarter.

With rivals such as Facebook Inc (FB.O) nipping at its heels, Alphabet had been trying to pump up advertising revenue from its mobile and video businesses, which have been much less profitable than its desktop business.

In a sign the company was becoming more sensitive to shareholders, Alphabet also announced on Thursday a $5.1 billion share buyback, its first ever.

Alphabet's new transparent reporting structure, to come into effect in the current quarter, also shows the company is becoming more shareholder-friendly, analysts said.

"The market has wanted four things from GOOGL – consistent revenue growth, margin stabilization, greater disclosure and cash back. What the market wants, the market gets," said RBC Capital Markets analyst Mark Mahaney.  — Reuters

Apple's China success sets stage for iPhone 6, new products

Strong sales of iPhones in China and emerging markets sets the stage for Apple Inc to reap even higher profits after it launches the next iPhone and other new products, analysts said.

At least 15 brokerages raised their price targets on the stock by as much as $60 to a high of $700 after it reported bumper results.

Shares of the company were up 8.5 percent at $569.49 in premarket trading on Thursday.

Apple's enlarged share buyback, bigger dividend, a larger iPhone 6 and new products would all drive the stock higher, RBC Capital Markets analyst Amit Daryanani said in a note titled "Buy before Tim does it himself".

On Wednesday, Apple reported sales of 43.7 million iPhones in the quarter ended March 29, far outpacing the 38 million that Wall Street had predicted. Revenue from greater China climbed 13 percent and Japan sales rose 26 percent.

Apple approved another $30 billion in share buybacks till the end of 2015 and authorized a rarely seen seven-for-one stock split, addressing calls to share more of its cash hoard while broadening the stock's appeal to individual investors.

Many Apple observers are betting on another successful product emerging from its secretive labs in Cupertino, California in the second half of this year - perhaps an iWatch for users to wear on their wrist. Chief Executive Tim Cook has promised new product categories for 2014.

"We believe the iPhone 6 will prove to be a big hit in China and elsewhere around the world, while the iWatch opens up a new product category for Apple, and we believe the ramp with China Mobile will accelerate in the second half of the year," Cantor Fitzgerald analyst Brian White said in a note.  — Reuters

source: gmanetwork.com