Angela Palumbo
Alphabet stock was dropping Wednesday after investors digested disappointing fourth-quarter advertising revenue, but analysts remained bullish on the company’s artificial-intelligence opportunities and valuation.
Shares of Google parent Alphabet were falling 5.6% in premarket trading Wednesday to $142.93, while Nasdaq Composite futures are about 1% in the red. Even though the tech-giant posted fourth-quarter earnings and revenue that beat Wall Street expectations, advertising sales missed the consensus call.
“Although GenAI tools across Search and Ads should be tailwinds to growth, 4Q results suggest Search growth likely continues to decelerate, despite a strengthening overall ad environment and we’ll be watching whether newer GenAI ad tools improve Google’s Search revenue trajectory, ” Citi analyst Ronald Josey wrote Wednesday.
Josey increased his price target on the stock to $168 from $153, and maintained his Buy rating, “given improving trends across Google Cloud, YouTube, and subscriptions as the broader advertising environment continues to strengthen.”
Despite the results that just weren’t good enough to impress investors, Wall Street analysts remain mostly bullish on the stock. Of the 59 analysts who cover Alphabet stock, 48 have Buy ratings, and 11 are at Hold, according to FactSet, which records no Sell ratings.
Guggenheim Securities analyst Michael Morris increased his price target to $170 from $150 and maintained his Buy rating. Morris wrote in a research note that valuation on forward earnings is “a discount to ‘Mag 7’ peers, a bargain in our opinion given multiple consumer and enterprise growth opportunities for the business.”
Alphabet is a member of the Magnificent Seven, a group of tech-focused stocks that also include Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The group is known for mostly outperforming the market, and for the large market capitalizations of its constituents. Alphabet shares currently trade at 22.3 times forward earnings, while those of Apple trade at 27.8 times forward earnings, Nvidia at 29.8 times, and Tesla at 59.2 times.
The excitement for the future of AI has not waned. Truist Securities analyst Youssef Squali wrote after Alphabet’s earnings report that the company “remains at the forefront of the AI race,” which should help drive sustainable double-digit growth in both the top and bottom lines. He rates Alphabet stock at Buy with a $158 price target.
Google announced the launch Gemini in December, the company’s most advanced AI software model to date.
Other tech stocks were dropping in premarket Wednesday trading, Microsoft stock was down 0.3%, Apple stock was off 0.1%, and Amazon stock was dropping 1.6%.
Write to Angela Palumbo at angela.palumbo@dowjones.com