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On Wednesday, Canaccord Genuity reaffirmed its Buy rating and $225.00 price target for Alphabet stock (NASDAQ:GOOGL), following Google’s announcement of a significant acquisition in the cloud security sector. With a current market capitalization of nearly $2 trillion and an impressive financial health score rated as "GREAT" by InvestingPro, Google has entered a definitive agreement to purchase Wiz, a cloud security platform, for $32 billion in cash. The deal, slated for completion in 2026, is subject to approval from both the Federal Trade Commission (FTC) and the Department of Justice (DOJ).
The acquisition aims to bolster Google’s position in the cloud market by integrating Wiz’s extensive security features across various cloud providers and coding environments. This move comes as part of Google’s ongoing strategy to capitalize on the increasing trend of enterprises moving workloads to hybrid or multi-cloud platforms. The company’s strong balance sheet, with more cash than debt and liquid assets exceeding short-term obligations, positions it well for such strategic investments.
Despite Google Cloud’s rapid growth trajectory, its market share lags behind competitors Microsoft (NASDAQ:MSFT) Azure and Amazon (NASDAQ:AMZN) Web Services. From a modest $275 million in revenue in 2014, Google Cloud’s earnings soared to $43 billion in 2024, outpacing Amazon Web Services’ growth rate by an average of approximately 10 percentage points per annum over the past three years. This growth contributes to Alphabet’s overall impressive revenue growth of 13.87% over the last twelve months, with total revenue reaching $350 billion. For deeper insights into Alphabet’s growth metrics and financial performance, InvestingPro offers comprehensive analysis through its Pro Research Report, available for over 1,400 US stocks.
Canaccord Genuity sees the acquisition as a solid strategic step for Google, potentially enhancing its security offerings and appealing to a broader customer base. While the valuation of Wiz at approximately 30 times its expected 2025 annual recurring revenue (ARR) might raise concerns among investors, Canaccord views Wiz as a rapidly growing, high-value asset in the cloud security space. The firm believes that Wiz’s unique cloud-native capabilities will enable Google to expedite its market share gains within the cloud security market. With a P/E ratio of 20 and strong profitability metrics, including a 58.2% gross profit margin, Alphabet continues to demonstrate solid fundamental performance. Discover more detailed financial analysis and 12 additional ProTips about Alphabet’s investment potential on InvestingPro.
In other recent news, Alphabet has announced a significant acquisition, agreeing to purchase cybersecurity firm Wiz for $32 billion in cash. This transaction, expected to close by 2026, aims to enhance Alphabet’s Google Cloud division by integrating Wiz’s advanced cybersecurity solutions. The acquisition is anticipated to reduce cybersecurity costs for customers and bolster multi-cloud security services. Analysts from Goldman Sachs, Stifel, Citi, and Evercore ISI have all maintained their positive ratings on Alphabet, with price targets ranging from $205 to $229, reflecting confidence in the strategic value of the deal.
Stifel highlighted Wiz’s impressive revenue growth, noting a 400% compound annual growth rate in annual recurring revenue since 2021. Meanwhile, Citi emphasized the potential competitive advantage this acquisition could provide against rivals AWS and Azure. Evercore ISI pointed out that Wiz’s decision to join Alphabet instead of pursuing an IPO signals a strategic alignment beneficial to both parties. Additionally, Quest Diagnostics (NYSE:DGX) has partnered with Google Cloud to enhance data management and AI capabilities, aiming to improve patient care and operational efficiency. This collaboration will leverage Google Cloud’s generative AI technologies to refine data analytics and personalize patient experiences.
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