Bernstein analysts downgraded shares of Alphabet (NASDAQ:GOOGL) to Marketperform from Outperform with a $125 per share price target.
“To many investors (and sell-siders), Google's stock is akin to a warm hug,” analysts said in a downgrade note.
The analysts flag a +40% year-to-date rally in Google’s stock, which makes it fairly valued at these levels. As a result, they note that “it’s time to move to the sidelines.”
Back to the fundamentals, Bernstein is still positive on the digital ad spend recovery. Still, the analysts highlight few headwinds facing Google.
“While the headlines are AI-focused, we see increasing competition from retail media, share-shift back to Meta, and yes, some Gen AI pressure capping near-term search growth,” the analysts added.
Moreover, the company’s “aggressive push to integrate Gen AI into core search results could create a near-term air pocket on search ad pricing.” Along these lines, the AI arms race is likely to pressure profit and FCF.
Google shares are down almost 1% in pre-market Tuesday.