Bank of America Securities on Wednesday revised its forecast for Alphabet Inc. (NASDAQ:GOOGL), raising its price target to $210 from $206 previously, while maintaining a “buy” rating for the stock.
The move follows Alphabet’s third-quarter net revenue report, which beat expectations of $74.5 billion, compared to $72.8 billion expected. This superiority was largely attributed to significant gains in the cloud computing and other revenue sector.
The analyst from Bank of America Securities noted that Alphabet’s search revenue saw a 12.2% year-on-year increase, in line with expectations.
while YouTube’s revenue grew 12%, slightly above expectations. However, both sectors saw growth slowdown on a quarterly basis.
Significantly, the cloud computing sector outperformed, accelerating growth to 35% year-on-year, beating street expectations of 29%. In addition, cloud margins improved by 582 basis points q-o-q, reaching 17%.
Alphabet’s other revenue also exceeded estimates, reaching $3.2 billion, contributing $0.16 to exceeding earnings per share. Earnings per share reported at $2.12, far exceeding the street’s forecast of $1.85.
The analyst suggested that the company-wide benefits of AI outweigh any potential disruption headwinds, positioning Alphabet as a net beneficiary of AI.
as evidenced by cloud computing performance in the third quarter and research in the second quarter.
Despite potential negative catalysts such as product rollouts from competitors and regulatory measures.
the analyst believes that the market may underestimate the value of the benefits that Alphabet can derive from AI in the coming year. Moreover, with the number of employees in the company remaining relatively constant year-on-year.
there is a favorable cost prediction that could drive strong EPS growth.
The price target hike is based on a higher core earnings per share forecast for 2025 and a fixed price-to-earnings (P/E) multiple of 22, as well as cash reserves. With the after-hours stock price at $181.
the analyst estimates that Google’s core search business is trading at an attractive multiple of 15 times the expected earnings per share for 2025, compared to the S&P 500 multiple of 21..
In other recent news, Google, affiliated with Alphabet Inc. Paused the mandatory restructuring of its Play Store by a judge in the US District Court in California.
amid an ongoing antitrust lawsuit with Epic Games.
The company has also been the subject of analyst interest.
with TD Cowen maintaining a “buy” rating for Alphabet stock and expecting a 13.0% year-on-year increase in total revenue for the third quarter of 2024. Truist Securities raised Alphabet’s price target and confirmed its “buy” rating.
expecting strong performance in the search and YouTube sectors and cloud computing in Alphabet.
Evercore ISI also suggested a possible rise in Alphabet’s shares, citing positive tests for advertising channels within the quarter.
while Goldman Sachs Inc. lowered its price target for Alphabet. These are recent developments and do not indicate future performance.
In addition, Google signed an agreement with Kairos Power to secure electricity from modular small reactors.
setting a precedent for the tech giant. The move is in line with a growing trend among tech companies to meet their growing energy needs through nuclear power.
Finally, Google’s ingenuity in AI has been underscored by the recent Nobel Prizes awarded to its experts.
demonstrating the company’s significant contributions in this field.
Alphabet’s strong financial position and market performance are further confirmed by recent data from InvestingPro. The company has a market capitalization of $2.1 trillion, reflecting its dominant position in the tech industry. Alphabet’s price-to-earnings ratio of 24.16 is particularly noteworthy when viewed in tandem with the PEG ratio of 0.5 for the past twelve months as of the second quarter of 2024.
suggesting that the stock may be undervalued compared to its growth potential.
InvestingPro’s advice highlights Alphabet’s financial strength, noting that the company “holds more cash than debt on its balance sheet” and that “cash flows can adequately cover interest payments.” These factors are consistent with the analyst’s positive outlook on the company’s cost management and the potential for EPS growth.
Furthermore, Alphabet’s revenue growth of 13.38% over the past twelve months and a strong operating income margin of 31.03% are supported by Bank of America Securities’ analyst’s observations on the company’s performance across various sectors, particularly in cloud computing and research.
For investors seeking a deeper understanding of Alphabet’s potential.
InvestingPro offers 11 additional tips, providing a comprehensive analysis of the company’s financial health and market position.
