Most Wall Street analysts are really positive ahead of Alphabet's earnings report after the bell

“Our advertiser checks point to continued strength in search, and especially strong growth in YouTube, with Merkle showing 99% yoy growth in YouTube spend in 1Q. Our conversations with partners were also encouraging around improving monetization of Maps, and mobile search ads via Google Assistant. While sentiment seems steady into the quarter, we do not believe investors expect nearly the same magnitude of upside as the $500mn net ad revenue outperformance in 4Q. We do, however, see an upside bias to consensus 1Q19 revenue expectations.”

“We maintain our Outperform rating as we expect these aforementioned developments to serve as validation of our investment thesis which remain rooted on the following: 1) ongoing monetization improvements in Search through product updates, 2) larger-than-expected contribution from Google’s larger non-Search businesses, and 3) optionality for value creation from new monetization initiatives such as Maps as well as the eventual commercialization of Google’s Other Bets (Waymo, Life Sciences).”

“For 1Q19, we est. a slight reported topline growth decelerlation vs. last year and further Core GOOG Op. margin compression, as cont’d TAC growth decel is offset by Other COGS growth. Shares would likely rise off the print with a small revenue beat and margin upside from faster TAC cost decel and potentially lower than expected R&D costs. We think earnings and evidence that recent product innovations have impacted financials could serve as a driver for the stock.”

“We remain positive on GOOGL into 1Q earnings on 4/29, as our checks with marketers and results from FB, TWTR and SNAP suggest advertiser demand remains strong as does user engagement, despite regulatory uncertainty and media scrutiny. We expect the company to show above-industry Y/Y growth with strength in NA and softness int’lly. Market-leading position in Search, video (Youtube), and emerging areas, combined with a reasonable valuation, keep us at Buy on GOOGL. Higher Opex/Investments and prospects for more regulation are key areas to monitor.”

“Based on 1Q search data and reported online advertising results, we expect continued solid growth for Google advertising in 1Q (though largely in line with consensus). We believe key focus points for the quarter will be on Google Properties growth (we estimate 19% y/y), TAC (expect up modestly q/q), operating expense growth (Google indicated on its 4Q call that headcount growth should moderate somewhat in 2019), and cloud traction. We maintain our outperform rating given solid continued advertising growth for both Search and YouTube, increasing Google Cloud traction, and an attractive valuation. “

“The next few months should be a barrage of positive catalysts for Google, including its annual developer conference (IO) and Marketing summit in mid May. As mentioned previously, 2019 is likely to shape up similar to 2015, whereby the company rationalized some of the excess spending in the prior year, margins flattened out a bit. We don’t see revenue accelerating from additional ad load as experienced in 2015 (3rd link in mobile in 3Q), but any signs of earnings growth acceleration is likely to be well received. Shares increased 47% in 2015 and we’d expect half of that in 2019, some of which has already been realized. At 24x 2020 EPS, the risk/reward isn’t as compelling as heading into 4Q (like many of our names) but still reasonable. Ironically, Senator Warren’s idea of breaking up big tech would likely unlock significant under-valuation for Google, more so than any other name.”

“For 1Q, we are 2% ahead of Street EBITDA even with 21% Y/Y headcount growth – vs 15% in 1Q last year – and hope headcount growth could be lower. GOOGL’s recent accounting change (moving performance fees below the line) should also make EBITDA cleaner. We acknowledge we are 24% below Street EPS as we incorporate GOOGL’s $1.7bn EU fine and mark-to-markets/performance fees from GOOGL’s investments that we do not think the sell-side is accounting for yet…and hope core top-line strength, incremental opex discipline, and reasonable valuation (11X ‘2020 EBITDA) overcome a fine-driven miss.”

“Steady indicators for 1Q search trends suggest achievable 1Q revenue growth expectations of +19% y/y (+20% Street) for Alphabet (from +23% FX-adj. in 4Q). We expect margin trends to begin to stabilize in 2019 as headcount growth decelerates and hardware and YouTube content costs normalize. With GOOGL shares currently near our $1,287 Target Price, we plan to review our estimates and valuation with the 1Q update.”

“Alphabet has reported remarkably stable top line growth—21%-25% for the past 14 quarters—and is expected to report 20%+ FXHN Alphabet gross revenue growth. Our checks with SEMs & 1Q earnings from FB, TWTR, & SNAP suggest online ad demand remained healthy in 1Q. Still, Alphabet’s overall gross revenue base is large, and growth should decel from +22.6% FXHN in 4Q, and we believe buy-side expects +21%. We model Alphabet gross revenue growth of +21.2% FXHN Y/Y & Google Properties gross revenue growth of +21.9% FXHN Y/Y.”

“Based on intra-quarter data points and our model sensitivity analysis, we believe Street estimates for Q1 are relatively reasonable with slight downside risk on the top-line due to increased FX headwinds and on the bottom-line due to continued de-leverage in non-TAC COGS (network costs, depreciation, content costs, hardware COGS, etc.).”