Alphabet/Google share price target raised to $900 by Credit Suisse citing YouTube Red subscriber revenue
Credit Suisse has lifted its price target for Google – now known as Alphabet – to $900 per share citing YouTube Red revenue as the catalyst.
The adjustment of subscriber number projections to the ad-free subscription service which launched in October with a $9.99 per month price tag spurred the increase from $850 per share, remaining outperform.
"While the initial investor reaction may be to dismiss the product, with over one billion users already on YouTube, we calculate that even a low-single-digit percentage rate conversion from free ad-supported to paid subscription will allow Google to monetise users at 10 times the annual average revenue per user (ARPU) versus that derived just from advertising,” it said in a note.
It forecasts that the service, which is yet to launch outside the US, will grow by 44 per cent annually, from $1bn revenue in 2017 to $6.3bn by 2022, converting three per cent of the current 1bn YouTube subscribers in the next five years and taking user numbers to 61m.
By 2021, Credit Suisse expects YouTube Red gross profit to stand at $2bn, accounting for just under two per cent of Google's overall gross profit.
Alphabet's average price target among analysts is around the $850 mark.