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Brokers: Google owner a better bet than Facebook

Last updated: 22:33 08 Jul 2016 AEST, First published: 17:33 08 Jul 2016 AEST

Tax dodging Google

Google owner Alphabet Inc (NASDAQ:GOOGL) may not offer the eye-popping growth of social media giant Facebook Inc (NASDAQ:FB), but what must now be regarded as one of the old codgers of the technology scene still has strong fundamentals, according to Societe Generale.

“It operates in a growing ecosystem (online taking more than two percentage points of the overall global ad pie per annum), has unmatched resources and is demonstrating improving financial discipline”, the French broker said.

At current levels – US$115 or so – the stock remains very attractive versus most global media/online stocks, including Facebook, in SocGen’s view.

Wedbush Securities has initiated coverage of Yelp Inc (NYSE:YELP), the local business review site, with a neutral rating and a US$30 a share price target.

The shares currently trade at a few cents above the price target level.

“We believe revenue and earnings growth may be constrained due to the perception among local businesses of a power imbalance on the platform that favours the user. Additionally, we expect competition for finite local marketing budgets to intensify from larger tech players with broader reach. We believe the popularity of the platform from a user perspective is offset by these economic growth concerns,” the broker said.

In contrast, GrubHub Inc (NYSE:GRUB), the online and mobile platform for restaurant pick-up and delivery orders, gets initiated with an ‘outperform’ rating by Wedbush, which has set a US$40 price target.

The shares currently trade at US$31.

“We believe GRUB is the market leader in the growing online restaurant ordering and delivery space and will continue to benefit from its early lead and superior size and scale,” Wedbush said.

“We believe recent delivery initiatives and strategic acquisitions coupled with continued diner adoption of mobile-based restaurant take-out and delivery methods should drive robust revenue and earnings growth for the foreseeable future,” it added.

Last night’s first quarter results from consumer products company Helen of Troy Limited (NASDAQ:HELE) were not the sort to launch a thousand shipments.

Broker Jefferies said the solid expansion, by 2.3 percentage points, in the gross margin and a 16% “beat” on the adjusted earnings per share (EPS) were overshadowed by revenue coming up about US$10mln, or 2.8%, short as both the nutritional and beauty segments turned negative.

The company did at least maintain full year revenue and EPS guidance despite worsening foreign exchange rates should be viewed as positives, the broker said, as it reiterated its ‘buy’ recommendation and US$114 price target.

“Embedded in this guidance is the assumption of beauty coming in at the low end of the previous -7% to -12% range,” the broker declared.


 

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