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On Wednesday, Canaccord Genuity reiterated its Buy rating and $225.00 price target for Alphabet stock (NASDAQ:GOOGL), following the tech giant’s release of its fourth-quarter earnings report. With a market capitalization of $2.53 trillion and an impressive "GREAT" financial health rating according to InvestingPro, Alphabet’s advertising revenue slightly exceeded expectations, with a roughly 1% increase, while overall revenue matched forecasts. Operating income surpassed consensus estimates by approximately 3%. Based on InvestingPro’s Fair Value analysis, the stock appears to be fairly valued at its current price of $206.38.
Search and YouTube advertising revenues saw a modest quarter-over-quarter acceleration, driven by robust holiday spending and political advertising, respectively. The company’s overall revenue growth of 14.38% year-over-year demonstrates its continued market momentum. Alphabet’s Cloud segment continued to show strength due to the growing customer adoption of its AI-powered solutions, although growth slowed as the year ended with demand outstripping supply. To address this, Alphabet plans to ramp up capital expenditure (CapEx) investments in 2025 to expand capacity.
Alphabet’s Cloud and YouTube segments concluded 2024 with an annual run rate of $110 million, surpassing the initial yearly projection of $100 million. The company has introduced Gemini 2.0 and is currently testing this model in AI overviews, with broader deployment expected later in the year.
The company anticipates a substantial year-over-year increase in CapEx for fiscal year 2025, estimating a budget of $75 billion, which is about 40% higher than the previous year and approximately $12.5 billion more than Meta (NASDAQ:META)’s midpoint CapEx forecast for the same period. Despite after-hours stock movement indicating investor concern over the increased investment and potential deceleration in growth, as well as currency exchange headwinds and the impact of the leap year on first-quarter reported growth, Canaccord’s analyst Maria Ripps believes that Alphabet’s leadership in product innovation will facilitate the successful integration of AI into its search business. With a strong return on assets of 22.8% and trading near its 52-week high of $207.05, Alphabet’s fundamental strength is evident. Ripps suggests that the current market reaction presents an appealing opportunity for investors. InvestingPro subscribers can access 13 additional investment tips and a comprehensive Pro Research Report for deeper insights into Alphabet’s financial health and growth prospects.
In other recent news, Alphabet Inc. has been the subject of various analyst assessments. Citi analysts lowered their price target for Alphabet from $232.00 to $229.00 but maintained a Buy rating, citing growth in Alphabet’s Search and YouTube platforms. KeyBanc Capital Markets also adjusted its price target for Alphabet to $220 but kept an Overweight rating, despite concerns about year-over-year comparisons in Search revenue and currency exchange headwinds.
On the other hand, DA Davidson held its Neutral rating on Alphabet shares with a consistent price target of $200.00, following Alphabet’s fourth-quarter earnings for 2024 that showed a slowdown in Google Cloud’s growth. Morgan Stanley (NYSE:MS) analyst Brian Nowak reduced the price target for Alphabet to $210 but kept its Overweight rating, acknowledging the company’s significant capital expenditure plans.
These recent developments suggest that while Alphabet faces challenges, such as increased competition and capacity constraints, it continues to invest in its core services and infrastructure. The company’s strategic moves, including the expansion of its Search AI Overviews, are anticipated to contribute to its growth trajectory. The analysts’ assessments reflect a cautiously optimistic view of Alphabet’s potential to navigate the competitive tech landscape.
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