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On Thursday, Piper Sandler analyst Thomas Champion reduced the price target on Alphabet stock, which trades on the NASDAQ under the ticker (NASDAQ:GOOGL), to $185 from the previous target of $208. Currently trading at $158.71, with a P/E ratio of 19.46, InvestingPro analysis suggests the stock is currently undervalued. Despite the price target reduction, the analyst retained an Overweight rating on the company's shares.Want deeper insights? InvestingPro offers 10+ additional expert tips for GOOGL, along with comprehensive valuation metrics and growth indicators.
Champion noted that Alphabet might act as a "port in the storm" in the digital advertising sector due to its size, supported by its impressive revenue growth of 13.87% over the last twelve months and strong financial health score of "GREAT" according to InvestingPro metrics. However, he also pointed out that recent share data for Alphabet has not been encouraging and that an ad buyer report was mixed. For the first quarter of 2025, Champion anticipates Alphabet to report revenues of $88.2 billion, marking a 9.5% increase year-over-year. This figure includes $49.3 billion from Search, $8.8 billion from YouTube, and $12.4 billion from Cloud services.
The analyst's revenue forecast is 1% below the consensus, while the operating income prediction of $29.1 billion is 1% above it. Due to these factors, Champion has revised his revenue estimates for 2025 and 2026 downward by 1% and 2%, respectively. Investors should note that Alphabet's next earnings report is scheduled for April 29, 2025, which will provide crucial updates on these projections.Access comprehensive analysis and real-time updates for GOOGL and 1,400+ other stocks with InvestingPro's detailed research reports and expert insights.
In his commentary, Champion highlighted that Alphabet's spending growth slowed down in the first quarter of 2025, showing a deceleration of approximately 250 basis points from the fourth quarter of 2024 and about 10 basis points below earlier estimates. This performance was also weaker than the average expectation. Earlier projections had anticipated an acceleration in Google Search throughout the first half of 2025, but this has not materialized, which Champion suspects is due to macroeconomic factors.
He also reported that the cost-per-click (CPC) rates are currently up 3% year-over-year, while click-through rates (CTRs) have decreased by roughly 4.5% year-over-year. On a positive note, YouTube has demonstrated stronger metrics with CTRs increasing by 10% year-over-year.
In other recent news, Alphabet Inc. has been the focus of multiple analyst evaluations and strategic developments. Citi analysts have adjusted their price target for Alphabet to $195, down from $229, while maintaining a Buy rating, citing insights from the Google Cloud Next (LON:NXT) conference and advancements in AI and infrastructure. Despite positive views on Alphabet's technology, challenges in the online advertising market influenced this adjustment. KeyBanc Capital Markets also revised their price target to $185 from $202, maintaining an Overweight rating, due to anticipated advertising sector challenges and a potential slowdown in enterprise IT spending on Google Cloud. JMP analysts, on the other hand, maintained a Market Perform rating, expressing concerns over potential disruptions to Google’s search distribution amidst an ongoing antitrust case.
Additionally, Verizon (NYSE:VZ) has reported a significant increase in sales after implementing an AI assistant developed using Google models, which has enhanced their customer service operations. This AI deployment by Verizon, highlighted during Google Cloud's annual conference, underscores the potential benefits of AI in business operations. The AI assistant has helped Verizon's customer service team increase sales by nearly 40%, showcasing a successful application of Google's AI technology. These recent developments reflect Alphabet's ongoing efforts to leverage AI and cloud services while navigating complex market dynamics.
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