Shares of Google's parent company, Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG), have risen about 60% over the past year, but there could be more fuel in the tank. Susquehanna analyst Shyam Patil recently raised Google's price target on Alphabet to $225 from $170 and maintained the firm's positive rating.
Why Wall Street's bullish for Alphabet
Patil and his investment bank colleagues are encouraged by Alphabet's recent performance. Both its advertising and cloud computing segments outperformed expectations. Total first-quarter revenue climbed 15% year over year to a record-breaking $80.5 billion.
First-quarter Google advertising sales climbed 13% year over year, and this isn't the only sign that the cyclical ad industry is in an upswing. Total acquisition costs crept forward more slowly than sales, which allowed operating profit to soar 46% year over year to $25.5 billion.
Alphabet employs about 10,000 fewer people than it did a year ago, but that didn't slow down its cloud computing business. Cloud sales rose 28% year over year to $9.6 billion. The cloud segment also reported a $900 million operating profit, which was a new record for the company.
Is Google's parent company a good stock to buy now?
Patil's $225 price target for Alphabet seems reasonable. The stock is up sharply this year, but it's still trading for a sensible valuation of around 23 times forward-looking earnings expectations. Even if the stock doesn't reach its target in the next 12 months, long-term shareholders have an excellent chance to come out ahead over the long run.
Alphabet recently declared a dividend and another $70 billion in stock buybacks. The quarterly payout of $0.20 per share translates to a minuscule yield of about 0.5%, but it's still a great sign of confidence from the company.
Should you invest $1,000 in Alphabet right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
