Alphabet Inc. (NASDAQ: GOOGL) closed up 1.78% at $168.68 ahead of earnings and Wednesday’s early trading indications had shares up over 6% at $180.00. That was closer to $176.50 by late in the day and the shares closed up just 2.8% at $174.46 by the day’s end. Oggonomics does not give full-blown earnings recaps because so many other sources are out there, but a 16% revenue gain in constant currency to $88.3 billion and earnings rising 37% to $21.12 per share is more than impressive. That is true even if you consider the Department of Justice case proceeding against Alphabet.
Oggonomics has tracked one consistency on Alphabet’s stock that was almost universal — higher price targets from Wall Street analysts!
One steady reminder from Oggonomics is that no single analyst report on any company should ever be the sole reason for an investor to buy, sell, hold, short sell or even avoid a stock. But what happens when the trend is universally in the same direction? The decision to buy or sell is always up to each investor and the gains or losses that follow are on each investor’s own shoulders.
There are many outside analyst calls looking for more upside ahead from the parent of Google and YouTube. These views being portrayed are solely the views of each brokerage and investment banking firm (or independent research firm). Oggonomics does not issue formal ratings nor does it publish its own formal price targets.
So, here is a summary of the many analysts covering Alphabet after the report.
MORE DETAILED CALLS
BofA Securities reiterated its Buy rating and raised its price objective to $210 from $206. BofA’s Justin Post saw a strong beat to earnings and falling costs on its AI efforts outweighing the disruption risks. Post said:
Another quarter of solid results suggest that company-wide Al benefits are outweighing any disruption headwinds and Alphabet is net Al beneficiary (Cloud in 3Q, Search in 2Q). We acknowledge potential negative catalysts (Meta AI and ChatGPT product rollouts, DoJ filing), but think Street could be overlooking AI Overview benefits next year. Also, with headcount flattish y/y, we continue to think Alphabet has a positive cost basis set up to drive strong EPS growth.
And despite the longer-term concerns, the overall investment rationale from BofA says:
We see Alphabet as well positioned long term with leading AI technology to apply to search, YouTube and Cloud businesses. Alphabet should also benefit from increasing mobile usage, video usage, Google Play activity, and connected device activity (including autos). We believe that Alphabet should trade at a premium to a media peer group given technology leadership, high margins, and strong cash flow generation for buybacks.
Morgan Stanley reiterated its Overweight rating and raised its target to $205 from $190. The firm noted that Google search showcased durability, while YouTube was better than expected and its expense discipline was key. Another development was disclosure about multiple emerging products and signals for adoption, engagement and monetization should give the market more confidence in Alphabet’s long-term positioning through the GenAI age.
Morgan Stanley’s Brian Nowak noted that Alphabet showcased how it’s using GenAI to become more efficient and productive internally with about 25% of new code at the company now coming from GenAI. It’s also improving its cost to serve AI Overview queries, supposedly down 90% over the past 18 months while also doubling the size of Gemini.
Morningstar has a 4-star rating on Alphabet with a wide moat for protection. The research firm raised its fair value estimate to $220 per share from $209 per share after its strong quarterly outperformance. It also noted that it reaches a $237 fair value estimate using a sum-of-the-parts analysis after factoring in Search alone as about 50% of the entire value. Morningstar even notes toward the end of its report that the DoJ recommendation, along with other remedies, will include the divestiture of Android and Chrome.
A VERY LONG SUMMARY OF HIKES!
Seaport Global formally upgraded Alphabet’s rating to Buy from Neutral and the price target was set at $200. Here are some of the additional calls that have been seen after Alphabet’s earnings. Here are more than a dozen analysts raising their price targets:
- Barclays reiterated its Overweight rating and raised its price target to $220 from $200.
- Bernstein maintained its Market Perform rating, target to $185 from $180.
- Canaccord Genuity reiterated its Buy rating and raised its target to $225 from $220.
- Citigroup reiterated its Buy rating and raised its price target to $216 from $212.
- Evercore ISI reiterated Outperform, target to $205 from $200.
- Jefferies reiterated its Buy rating and raised its target to $235 from $220.
- KeyBanc Capital Markets reiterated its Overweight rating, target to $215 from $200.
- JMP Securities reiterated its Outperform rating, target to $220 from $200.
- JPMorgan reiterated its Overweight rating and raised its target to $212 from $208.
- Needham reiterated its Buy and $210 price target.
- Piper Sandler reiterated its Overweight rating, target to $210 from $200.
- Pivotal Research reiterated its Buy rating, target to $225 from $215.
- Rosenblatt maintained a Neutral rating but raised its target to $193 from $181.
- Roth MKM reiterated its Buy rating, target to $212 from $206.
- UBS maintained a Neutral rating but still raised its target to $192 from $187.
- Wolfe Research reiterated its Outperform rating and raised its target to $220 from $200.
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Again, all formal ratings and formal price targets expressed here were issued by each outside firm independently.
