Google is on the offensive: What analysts are saying after earnings | Wilnesh News
Analysts and investors breathed a slight sigh of relief after Alphabet’s latest quarterly earnings report, as the company’s progress in artificial intelligence and the state of Big Tech after an industry-wide sell-off eased concerns. Google’s parent company reported first-quarter earnings that beat profit and revenue expectations. The search engine giant also announced its first-ever dividend and $70 billion in buybacks, sending shares up 10% on Friday to a record high. Analysts at major companies from UBS to Bank of America were encouraged by the accelerated growth the company reported last quarter in Google search, cloud computing and YouTube. Some are touting Alphabet as the new major artificial intelligence company and believe the tech giant has plenty of room to grow. At the same time, some question how much the stock can sustainably do against the backdrop of such massive spending on artificial intelligence. GOOGL YTD Google stock this year. J.P. Morgan analyst Doug Anmuth reiterated his overweight rating and raised his price target by $35 to $200, saying he’s optimistic about the tech giant’s efforts to drive strong top-line growth and deliver earnings through a redesign of its cost structure. Ability “increasingly optimistic”. He expects Alphabet to increase spending to around $50 billion this year to join peers in supporting its artificial intelligence ambitions. “After more than a year of lagging behind on the AI front, we believe GOOGL is starting to go on the offensive,” Ames wrote in a note. “The company is starting to bring AI responses into the main search results page, and AI users are starting to Anmuth added: “Management also expressed confidence that the shift to generative AI in search will expand the search market opportunity, just like the shift to mobile and voice that GOOGL has seen. .” Barclays analyst Ross Sandler also has a bullish view on the stock. “Google is in the best position to accelerate growth and expand profits while delivering products faster and returning capital — essentially proving the naysayers wrong,” Sandler wrote in a note Thursday. Adding that market slowdown and competition are some threats that could threaten the stock, but not in the short term. Sandler maintained an Overweight rating and raised his price target by $27 to $200, implying a potential upside of 28% from Thursday’s closing price. Jefferies’ Brent Thill maintained a buy rating and raised his price target by $20 to $200, saying the stock is attractively valued. Accelerating growth in Google’s core advertising and cloud revenue is a bright spot for Thill, but analysts remain cautious about Google’s spending, which is expected to grow by more than 50% this year, driven by investments in artificial intelligence. Oppenheimer analyst Jason Helfstein raised the price target by $20 to $205 and maintained an outperform rating, saying that despite Google’s heavy investment in artificial intelligence, accelerating growth in the advertising business is a driver of operating leverage. Catalysts for the stock include increased YouTube monetization and improved profitability in Google Cloud, the analyst said. He expects the company’s net advertising revenue to grow at a compound annual growth rate of 9% between 2023 and 2026. Bank of America analyst Justin Post maintained a buy rating and $200 price target, saying Alphabet is well positioned for the long term, even if current revenue suggests the company’s “growth rates ahead may be more challenging.” Post said in a report: “All major business lines exceeded expectations in the quarter, supporting a narrative change: Google is the beneficiary of artificial intelligence. There is still a risk of disruption in search, but we are optimistic about Google infrastructure, data and distribution advantages remain constructive. “We believe the dividend will support higher long-term P/E ratios, but expect industry growth to moderate in Q2 amid tougher quarter-to-quarter conditions. Still, Post said Alphabet should trade at a premium to its media peers, given its technology leadership, high margins and strong cash flow for buybacks. UBS analyst Ken Gorecki Ken Gawrelski also praised Google’s cost discipline and “overdue” dividend, but maintained a somewhat cautious stance on the stock. He noted that “it’s unclear whether GenAI can drive a large new product cycle” and that demand from some advertisers may slow. He reiterated a neutral rating and raised his price target by $7 to $173, particularly because of YouTube’s growth, which he noted will recover and add about $5 billion in revenue in 2024. Its potential is only about 11% higher than Thursday’s closing price. “Accelerating search growth eliminates our concerns about search deceleration, but does not change our view of digital ad share losses and risks associated with search format transformation,” Garelski said in a note.
