Guggenheim lifts Alphabet stock target to $220, keeps buy rating

On Wednesday, Guggenheim Securities updated its outlook on Alphabet Inc. (NASDAQ:GOOGL), increasing the price target to $220 from the previous $215 while reiterating a Buy rating on the stock. Currently trading at $206.38 and near its 52-week high of $207.05, Alphabet has demonstrated strong momentum with a 44% return over the past year. The adjustment follows Alphabet’s fourth-quarter earnings report, which aligned with Guggenheim’s and the consensus estimates for overall revenue and operating profit.

The firm’s analyst noted that Alphabet’s search and YouTube segments performed better than expected, while other areas fell short. With revenue growth of 14.38% and an impressive market capitalization of $2.53 trillion, Alphabet maintains its position as a dominant player in the tech sector. Despite robust search growth, which saw a slight acceleration to 12.5%, concerns persisted due to a combination of factors. According to InvestingPro, which offers comprehensive analysis of 1,400+ US stocks, Alphabet maintains excellent financial health with strong cash flows and minimal debt. These factors become particularly relevant when considering the projected increase in capital expenditures to $75 billion in 2025, up from Guggenheim’s estimate of $63 billion and the consensus of $48 billion.

The report acknowledged that while the market sentiment might be affected by these factors, the expectation is that Alphabet’s investments in AI infrastructure will lead to substantial long-term growth. With a P/E ratio of 27.31 and strong return metrics, including a return on equity of 32%, Alphabet demonstrates efficient capital allocation. Guggenheim anticipates that investors will favor companies that can demonstrate clear returns on their AI investments. For deeper insights into Alphabet’s valuation and growth metrics, investors can access detailed analysis through InvestingPro, which features 13+ additional ProTips and comprehensive financial metrics.

The analysis also compared Alphabet’s performance to that of Meta Platforms (NASDAQ:META), Inc., which reported an acceleration in revenue growth and a significant profit surplus for the fourth quarter. This comparison suggested that Meta’s results had set a higher standard for Alphabet’s earnings.

Maintaining the Buy rating, Guggenheim slightly reduced its financial estimates for Alphabet for the years 2025 and 2026, which is reflected in the updated price target. The firm’s analyst concluded by emphasizing the potential for Alphabet’s near-term AI-infrastructure investments to yield attractive growth in the long run.

In other recent news, Alphabet’s latest fourth-quarter earnings report has sparked a flurry of analyst activity. Canaccord Genuity reiterated its Buy rating for Alphabet, noting that the tech giant’s advertising revenue slightly exceeded expectations and overall revenue matched forecasts. The firm also highlighted Alphabet’s plans to increase capital expenditure in 2025 to expand capacity.

Meanwhile, Citi analysts have maintained a Buy rating for Alphabet, despite lowering the price target from $232.00 to $229.00. The adjustment follows the company’s fourth-quarter earnings report, which prompted an after-hours share price decline. Citi analyst Ronald Josey cited growth in Alphabet’s Search and YouTube platforms as positive signs, despite capacity constraints in Cloud services.

On a similar note, JMP Securities maintained its Market Perform rating for Alphabet, citing potential anti-trust penalties that could affect Google’s distribution and revenue from search operations in the U.S. DA Davidson also held its Neutral rating on Alphabet shares, following the company’s fourth-quarter earnings report that showed a slowdown in the growth of Google Cloud.

Lastly, KeyBanc Capital Markets adjusted its price target for Alphabet to $220 from the previous target of $225, while maintaining an Overweight rating. The firm’s analyst Justin Patterson attributed the dip in stock price to investor concerns regarding tougher year-over-year comparisons in Search revenue, currency exchange headwinds, and anticipated increases in capital expenditures and depreciation.

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