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On Friday, Stifel analysts increased their price target for Alphabet Inc. (NASDAQ:GOOGL) shares from $192.00 to $200.00, while reiterating a Buy rating on the stock. The adjustment follows Alphabet’s first-quarter earnings report, which showcased slightly better-than-expected advertising revenue and in-line results for both YouTube and Cloud revenues. With a market capitalization of $1.95 trillion and revenue growth of ~14% over the last twelve months, Alphabet continues to demonstrate strong market performance. According to InvestingPro analysis, the company appears slightly undervalued based on its Fair Value metrics.
The company’s margins have remained robust, even with a rise in capital expenditures and related depreciation. With a strong gross profit margin of 58.2% and an impressive return on assets of 23.48%, Alphabet’s financial health is rated as GREAT by InvestingPro. Alphabet’s management emphasized their commitment to maintaining operating margins as depreciation expenses are expected to increase throughout the remainder of the year and beyond. This is anticipated to be achieved through slower compensation growth and optimization of real estate.
Alphabet’s capital expenditures for 2025 are projected to be around $75 billion, a figure that was anticipated and is predicted to fluctuate over the year. These investments are seen as crucial for improving the supply and demand balance for Cloud services towards the end of the year.
In the realm of artificial intelligence (AI), Alphabet’s Gemini platform is reported to have over 1.5 billion monthly users. Additionally, the monetization of AI features is described as being approximately on par with traditional search revenue. The company’s focus on AI continues to be a positive narrative, with no significant surprises reported in the latest quarter.
Stifel’s analysts have maintained their operating estimates for Alphabet for the years 2025 and 2026. The new price target reflects a forward-looking approach as they transition their valuation to the next twelve months.
In other recent news, Alphabet’s first-quarter earnings have drawn significant attention, with several financial firms adjusting their outlooks on the tech giant. Oppenheimer raised its price target to $200, citing strong earnings per share that exceeded expectations by 7%, driven by robust Services margins and AI enhancements in its Search feature. Truist Securities maintained a Buy rating with a $200 price target, highlighting Alphabet’s progress in Search, YouTube, and Cloud services, despite anticipated headwinds in the Financials and Retail segments later in the year. Piper Sandler also revised its price target to $195, noting a 12% revenue growth and strong performance in YouTube and Search, although the Cloud division slightly underperformed their estimates.
RBC Capital Markets reiterated an Outperform rating with a $200 price target, praising Alphabet’s better-than-expected earnings and successful monetization of AI Overview. They emphasized the company’s strategic financial decisions and capital return as positive factors. KeyBanc Capital Markets increased its price target to $195, maintaining an Overweight rating. They pointed out Alphabet’s AI distribution capabilities and anticipated cost efficiencies as key drivers for future earnings growth. These recent developments reflect a cautious optimism among analysts about Alphabet’s ability to navigate economic challenges and capitalize on AI advancements.
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