JPMorgan cuts Alphabet stock price target to $220 from $232

On Wednesday, JPMorgan analyst Doug Anmuth adjusted the price target for Alphabet Inc (NASDAQ:GOOGL) shares, dropping it to $220 from the previous $232, while maintaining an Overweight rating. The revision follows Alphabet’s fourth-quarter financial results, which revealed revenue and operating income figures that were slightly below market expectations. Despite the initial 7% decline after earnings, Alphabet’s stock has shown remarkable resilience, currently trading at $207.71, near its 52-week high of $208.70. According to InvestingPro data, the company has demonstrated strong momentum with a 29.62% return over the past six months.

The company reported a 12% year-on-year increase in revenue on a foreign exchange-neutral basis (FXHN) and a 32.1% operating margin. Anmuth highlighted that the results from Google’s Search and YouTube were robust, with Search revenue growing approximately 13% FXHN and YouTube exceeding forecasts with a 14% FXHN increase. The revenue shortfall was attributed primarily to declines in the Network, which saw a 4% year-on-year decrease, as well as in the Single Platform Direct (SPD) and Cloud services. InvestingPro analysis shows Alphabet maintaining strong fundamentals with a 58.13% gross profit margin and an impressive return on equity of 32%. For deeper insights into Alphabet’s financial health metrics and 13 additional ProTips, consider exploring InvestingPro’s comprehensive research platform.

Anmuth pointed out that Alphabet anticipates a significant increase in capital expenditures (capex) for 2025, estimating around $75 billion, which is 43% higher than in 2024. This investment is intended for the expansion of AI infrastructure, including servers, data centers, and networking equipment. Although Cloud revenue grew by 30%, it showed a slowdown from the 35% growth seen in the third quarter. The company also noted that it is currently capacity constrained, with demand surpassing supply.

The analyst addressed concerns regarding Alphabet’s future capex, the trajectory of Cloud revenue, and the potential for cost and margin expansion in the fourth quarter of 2025. Despite a slight decrease in operating income margin in the fourth quarter, Alphabet still achieved a 465 basis points year-over-year margin expansion, or 325 basis points excluding one-time items. However, questions remain about the company’s ability to continue expanding margins in 2025 amidst potentially slower revenue growth and increasing depreciation.

Anmuth’s forecast for Alphabet’s 2025 operating income has been reduced by 2% to $126 billion, assuming a modest 50 basis points of margin expansion. He also revised the 2025 and 2026 revenue projections downward by less than 1%, while operating income estimates were reduced by 2%, mainly due to higher depreciation expectations.

Despite these adjustments, Anmuth expressed optimism about Google’s AI innovations and solid advertising growth. He concluded that while near-term pressure is expected as the market adjusts to the higher spending outlook, the long-term view on Alphabet shares remains positive. The $220 price target for December 2025 is based on approximately 22 times the estimated GAAP EPS of $10.03 for 2026. InvestingPro’s analysis indicates Alphabet’s strong financial health with an overall score of "GREAT" and robust cash flow metrics. The company’s current P/E ratio of 27.08 and expected EPS growth suggest potential for continued value creation. Access the complete Pro Research Report for comprehensive analysis of Alphabet’s market position and growth prospects.

In other recent news, Google has launched Meridian, an open-source marketing mix model designed to provide a modern approach to measuring marketing outcomes. The tech giant also committed to major alterations in handling fraudulent reviews, as stated by the UK’s Competition and Markets Authority.

Alphabet Inc., Google’s parent company, has been the subject of recent analyst attention. Scotiabank (TSX:BNS) upgraded Alphabet’s stock price target to $240, highlighting the company’s strong position in artificial intelligence. BMO Capital Markets echoed this positive sentiment, maintaining an Outperform rating and raising the price target to $230.00, citing optimism in Alphabet’s revenue streams, including Search, Google Cloud Platform, and YouTube.

However, Cantor Fitzgerald held a Neutral rating on Alphabet shares, pointing to ongoing antitrust uncertainties and risks associated with artificial intelligence. These recent developments highlight the dynamic nature of Alphabet’s operations and the varying perspectives of market analysts.

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