Alphabet stock price target cut to $165 by Bernstein

On Wednesday, Bernstein analysts adjusted their outlook on Alphabet Inc. (NASDAQ:GOOGL), reducing the price target to $165 from the previous $200, while maintaining a Market Perform rating on the shares. Currently trading at $151.47, with analyst targets ranging from $159 to $240, the stock appears undervalued according to InvestingPro analysis. The revision reflects a cautious stance amid a mix of potential upsides and challenges facing the tech giant, which maintains a "GREAT" financial health score of 3.17 out of 5.

Analyst Mark Shmulik from Bernstein highlighted the positives for Alphabet, noting the stock’s relatively low price, its defensive position in the advertising sector compared to peers, and its potential to gain cloud market share even in a tough environment. The company’s strong fundamentals support this view, with robust revenue growth of 13.87% over the last twelve months and an attractive PEG ratio of 0.48, indicating good value relative to growth. Despite these strengths, concerns were raised about Alphabet’s exposure to cyclical advertising and macroeconomic fluctuations, the impact of AI on search market share, and increasing regulatory pressures that could alter the company’s operational structure in the future.

The report emphasized the complexity of forecasting Alphabet’s revenue and earnings per share (EPS) over the next two years due to the numerous uncertainties. The analyst acknowledged a wide range of possible outcomes and pointed to upcoming events such as the Google I/O conference, which could sharpen the company’s AI narrative, while legal decisions on search and advertising could either clarify or complicate the situation.

In determining the new price target, Bernstein’s analysis considered a sum-of-the-parts (SOTP) valuation, which suggested a downside case of around $140 and an upside of approximately $180. The $165 target price is based on a blended approach, valuing Alphabet at 17 times the projected 2026 earnings per share of $9.77. The valuation methodology combined a 2026 enterprise value (EV) to EBIT multiple of 13 times with a discounted cash flow (DCF) analysis, using a weighted average cost of capital (WACC) of 9% and a terminal growth rate of 2.5%. Additionally, the firm’s 2026 EBIT estimates were revised downward from $139 billion to $134 billion, with the valuation benchmarked against peers in the digital advertising industry.

In other recent news, Alphabet’s Google has been in the spotlight with several significant developments. The Competition Commission of India approved Google’s settlement proposal in its Android TV case, which involved charges of anticompetitive practices. Google agreed to pay 202.4 million rupees ($2.38 million) as part of the settlement, marking a notable resolution to the case. Meanwhile, in the United States, Google is facing an antitrust trial where the Department of Justice is pushing for measures to reduce Google’s dominance in online search and related advertising. The DOJ’s proposals include forcing Google to divest its Chrome browser and unbundle Android, which Google argues could harm consumers and technological innovation.

Additionally, Tesla (NASDAQ:TSLA) is set to release its first-quarter results amidst questions about its sales objectives. CEO Elon Musk announced plans to focus more on Tesla, reducing his involvement with the US government and cryptocurrency DOGE. In other market movements, members of the "Magnificent Seven," including Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), and Meta (NASDAQ:META), saw positive trading activity. Apple’s shares rose following comments from President Donald Trump about potential tariff reductions on China, which could benefit the company’s supply chain.

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