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At the time of writing, Alphabet ( NASDAQ:GOOG ) is the world’s fourth-largest company by market cap behind Nvidia. Of course, this could change by tomorrow, given the disparities between these companies aren't as wide as they once were. And there are certainly many analysts who think that's entirely possible, given Alphabet's core business and growth prospects.
The company is a dominant player in the world of internet stocks, with a near-monopoly on search and a dominant presence in the cloud and social media sectors as well. Essentially, as online advertising spending has increased over time, and Alphabet has continued to grow its market share, this is a company that's seen its operating leverage and cash flow metrics explode higher. This has been seen in the company's most recent quarterly results , in which Google Search revenue rose 14%, YouTube ads surged 13%, and Google Cloud grew 29%. This growth pushed Alphabet’s operating income to a record $98 billion, surpassing Nvidia’s operating earnings of just under $50 billion.
A top Magnificent Seven stock, Alphabet is drawing attention from top value investors like Li Lu, Bill Nygren, and Bryan Lawrence. Li Lu's Himalaya Capital holds nearly 40% of its portfolio in Alphabet, and that's just one example of institutional investors continuing to hold heavy exposure to this name.
Let's dive into some of the analysts that share this enthusiasm, and why this stock could be headed higher from here.
Key Points About This Article:
- Alphabet is a Magnificent 7 stock that has rocketed higher this year, but could have much more room to run, according to a number of analysts.
- Here are three analyst takes on the search, cloud and social media giant that are worth considering right now.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report . It features AI stocks we’re confident have 10X potential and will be leaders in the AI craze unfolding now.
DZ Bank: Ingo Wermann
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DZ Bank's Ingo Wermann recently raised his price target on GOOG stock to $200 per share, up from $175, maintaining his buy rating. Alphabet's stock hit new highs on this news, helped by very strong quarterly results . Alphabet reported double-digit revenue and net income growth, surpassing analyst expectations. Accordingly, it's no surprise to see Wermann up his price target on an optimistic outlook following Alphabet’s impressive financial performance. It's entirely plausible (if not likely) Alphabet will continue to outperform, given the catalysts the company is riding for its growth.
Alphabet's growth remains driven by its dominant Google search business, which has become synonymous with online search in most parts of the world. The company's YouTube and cloud businesses also generate significant revenue. With its strong market position and resources, Alphabet is well-positioned to explore new revenue streams and integrations, with most attention currently placed on the company's AI ambitions. Despite some recent challenges, the company’s stock is expected to see substantial gains in the future - at least, this analyst thinks so.
Philip Securities: Jonathan Woo
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Alphabet's stock rose July 29 after Phillip Securities upgraded their price target on GOOG stock, driven by an updated outlook driven by the company's strong prospects for AI-driven growth. Analyst Jonathan Woo raised his price target to $205 from $195, citing confidence in Alphabet’s future. Despite a 5% drop in GOOG stock post-earnings, Woo sees the decline as a buying opportunity, noting the stock is now trading below its five-year average valuation.
Woo highlighted Alphabet’s AI leadership as crucial for driving growth and operational efficiency. He noted the company's tech talent and strong cash flow support ongoing AI advancements. Similarly, William Blair's Ralph Schackart praised Google for its innovations and successful AI integration, maintaining an Outperform rating on the tech giant.
A number of analysts have pointed out Alphabet's strong search and cloud results, as well as its effective cost management initiatives, are going to be key to future success. However, most attention of late has been placed on the company's AI capabilities. Despite competitive concerns, there are reasons to believe Alphabet can outperform in this realm, and Woo is certainly on board with this thesis.
KeyBanc: Justin Patterson
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Among the analysts that maintained their price targets following Alphabets Q2 earnings was KeyBanc Capital Markets analyst Justin Patterson. The analyst reiterated his $200 price target and buy rating, suggesting that the quarter was solid, despite an outlook that could create concerns on revenue growth moving forward.
Like the other analysts covering this name, a $200 price target appears to be in line with where the stock could be headed over the next year, and suggests around 18% upside is possible from here.
Of course, additional capital spending plan updates, and any improvements to Alphabet's revenue growth prospects could result in future upgrades down the road. But based on 2025 estimates for free cash flow, this stock appears to be reasonably valued, with decent upside from here. I tend to agree with this more moderate outlook on a number of levels, as Alphabet is certainly among the best value plays among the Magnificent 7, and is likely to remain that way for some time.
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