UBS maintains Alphabet stock Neutral rating, $209 target

On Wednesday, UBS analyst Stephen Ju confirmed a Neutral rating with a $209.00 price target for Alphabet Inc. (NASDAQ:GOOGL), a company currently valued at nearly $2 trillion and generating over $350 billion in annual revenue, following the tech giant’s acquisition of cybersecurity company Wiz. According to InvestingPro data, Alphabet maintains strong financial health with more cash than debt on its balance sheet. Ju noted that Alphabet has agreed to purchase Wiz for $32 billion in cash, a figure 40% above the $23 billion previously speculated in media reports last year. The acquisition price is also approximately 2.7 times Wiz’s last valuation of $12 billion in May 2024.

The deal values Wiz at around 32 times its projected annual recurring revenue (ARR) for 2025, which is around $1 billion. This valuation is considerably higher than the trading multiples of 10x to 20x for Wiz’s public competitors. Ju points out that the purchase price comes at a significant premium. While Alphabet itself trades at a P/E ratio of 20.2x, InvestingPro analysis suggests the stock is currently trading below its Fair Value, with analysts setting price targets ranging from $184 to $240.

The UBS analyst drew parallels between this acquisition and Google’s earlier purchase of Mandiant, viewing it as indicative of Google’s ongoing short-term investment strategies. However, Ju expressed a belief that investors will likely refocus on broader concerns, such as the return on invested capital (ROIC) for generative AI (genAI), unresolved regulatory issues, and potential market share losses in Google’s core businesses.

Ju’s commentary underscores that while Alphabet is making substantial investments in cybersecurity through acquisitions like Wiz, the overall investor sentiment may remain cautious due to the larger, unresolved issues surrounding the company. The maintained Neutral rating suggests that UBS sees these concerns as balancing out the potential benefits from Alphabet’s recent acquisition strategy. Despite recent market challenges, with the stock down 15% year-to-date, Alphabet maintains robust financials with a strong return on equity of 33% and an impressive Altman Z-Score of 12.2, indicating solid financial health. For deeper insights into Alphabet’s financial metrics and growth potential, investors can access comprehensive analysis through InvestingPro’s detailed research reports, which cover over 1,400 top US stocks.

In other recent news, Alphabet has announced a significant acquisition of Wiz, a cloud security company, in a $32 billion all-cash deal. This transaction, expected to be completed in 2026, is anticipated to enhance Alphabet’s cloud security capabilities and support its AI innovation efforts. BMO Capital Markets has maintained an Outperform rating for Alphabet, citing the strategic potential of this acquisition to bolster its cloud offerings. Similarly, Truist Securities and Goldman Sachs have reaffirmed their Buy ratings, with price targets set at $220, highlighting the deal’s potential to strengthen Google Cloud’s market position.

Canaccord Genuity also reaffirmed its Buy rating, setting a price target of $225, while noting that Wiz’s integration could accelerate Google’s market share in the cloud security space. Cantor Fitzgerald, however, maintained a Neutral rating with a $200 price target, acknowledging the acquisition’s positive impact but expressing caution due to broader market concerns. Despite varying analyst opinions, the acquisition underscores Alphabet’s commitment to expanding its technological capabilities and addressing cybersecurity challenges. The deal awaits regulatory approval, reflecting its substantial nature and potential implications for the tech industry.

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