S&P 500 slips, but losses kept in check as Nvidia climbs ahead of results
On Monday, BofA Securities maintained a positive stance on Alphabet Inc. (NASDAQ:GOOGL), currently trading at $187.14 with a market capitalization of $2.27 trillion, reiterating a Buy rating and a $225.00 price target. According to InvestingPro analysis, Alphabet maintains a "GREAT" financial health score, and their calculations suggest the stock is currently undervalued. BofA Securities highlighted that current AI technologies, including ChatGPT, have not significantly affected Google’s search traffic or market share. Instead, these AI engines might be gaining a substantial portion of the new AI-driven activities.
According to the analyst from BofA Securities, while traffic data are estimates, Alphabet’s management reported strong growth in search volumes during the fourth quarter of 2024, supported by the integration of AI Overviews and Circle to search features. The fourth quarter indeed showed impressive performance, with revenue growing 13.87% year-over-year to $350 billion. This robust revenue growth for Google Search reinforces the firm’s positive outlook on the potential for AI to enhance monetization of Google’s search services. For deeper insights into Alphabet’s financial performance, InvestingPro subscribers have access to over 12 additional key metrics and expert analysis.
The report also mentioned recent channel checks that indicate advertisements appearing in top positions within AI-generated content are experiencing higher click-through rates (CTRs), which could potentially contribute to stronger search pricing.
Despite the optimistic view, BofA Securities also noted potential risks facing Alphabet in 2025. These include possible traffic losses due to new AI competitors, the impact of OpenAI’s advertisements on Google’s search budget, and the outcome of US and EU court decisions that could affect long-term investor sentiment towards the company. Recent market activity reflects some of these concerns, with the stock experiencing a 7.65% decline over the past week, though analyst consensus remains strongly bullish with price targets ranging from $200 to $235.
In other recent news, Alphabet has made headlines with a series of financial adjustments and new developments. Scotiabank (TSX:BNS) and JPMorgan have revised Alphabet’s stock price target, with Scotiabank adjusting it to $232 from $240, and JPMorgan reducing it to $220 from $232. The adjustments came following Alphabet’s earnings report, which revealed revenues of approximately $96.5 billion, slightly missing estimates. The company also projected around $75 billion in capital expenditure for the year 2025, a significant increase that has influenced the analysts’ outlook.
In addition to these financial updates, Alphabet has launched a new product, Meridian, an open-source marketing mix model designed to assist marketers and data scientists in making data-driven decisions. Furthermore, Alphabet has committed to making major changes in its review handling process, specifically targeting fraudulent reviews, following a statement from the UK’s Competition and Markets Authority.
These recent developments demonstrate Alphabet’s commitment to financial transparency and technological advancement, as well as its dedication to maintaining a reliable and trustworthy platform for its users.
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