On Wednesday, Citi analysts adjusted their outlook on Alphabet Inc (NASDAQ: NASDAQ:GOOGL) stock, lowering the price target from $232.00 to $229.00, while reaffirming a Buy rating on the company's shares. The revision comes in the wake of Alphabet's fourth-quarter earnings report, which prompted an after-hours share price decline of 8%. Currently trading at $206.38, the stock maintains strong momentum, sitting near its 52-week high of $207.05. InvestingPro analysis reveals the company's "GREAT" financial health score, with 13 additional key insights available to subscribers.
Ronald Josey at Citi cited a reacceleration in growth for Alphabet's Search and YouTube (YT) platforms as a positive sign, despite noting that Cloud services are currently limited by capacity constraints. Josey views these constraints as a longer-term benefit for the company. Despite the capex increase for the expected year 2025 to $75 billion, representing a 43% year-over-year rise, the analyst remains optimistic about Alphabet's future. The substantial investment is seen to affect free cash flow (FCF) and earnings per share (EPS) projections, but the recent launch of Search AI Overviews in over 100 countries is expected to drive higher query volumes and support sustained growth in Search. This optimism is supported by Alphabet's impressive 14.38% revenue growth and strong return on equity of 32%. For detailed analysis and comprehensive metrics, access the full InvestingPro Research Report, part of our coverage of 1,400+ top US stocks.
Josey acknowledged that the first quarter presents tougher comparisons and that Google is actively investing in its business. However, he maintains that the online advertising market, in general, is still relatively healthy. The slight decrease in the price target reflects the anticipated impact of these investments on Alphabet's profitability.
The company's strategic moves, including the expansion of its Search AI Overviews, are anticipated to contribute to its growth trajectory. Alphabet's continued investment in its core services and infrastructure, despite the immediate financial impact, underscores its commitment to long-term development and market leadership.
In other recent news, Alphabet Inc. has been the subject of various analyst evaluations after its recent earnings report. JMP Securities maintained a Market Perform rating, citing potential antitrust penalties that could impact Alphabet's search operations. DA Davidson also held its Neutral rating, noting a slowdown in Alphabet's Google Cloud growth, despite the positive impact of integrating artificial intelligence across its product range.
In addition, KeyBanc Capital Markets adjusted its price target for Alphabet to $220, maintaining an Overweight rating. The firm pointed out investor concerns about year-over-year comparisons in Search revenue, currency exchange headwinds, and anticipated increases in capital expenditures. Morgan Stanley (NYSE:MS) also reduced its price target to $210 but maintained an Overweight rating, highlighting Alphabet's extensive product pipeline and capital expenditure plans.
In contrast, BofA Securities reiterated a Buy rating with a $225 price target, expressing confidence in Alphabet's core search business and the potential benefits of AI integration. These are the recent developments concerning Alphabet, as the company continues to navigate the competitive tech landscape.
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