Alphabet (NASDAQ: GOOGL), like the majority of its tech peers, has completed its stock split. While the 20-for-1 split could increase GOOGL stock’s appeal to retail investors, ongoing headwinds will likely hurt its near-term business growth.
Alphabet’s CFO, Ruth Porat, warned during the Q1 conference call that the company is up against tough year-over-year comparisons. Meanwhile, the ongoing macro headwinds will likely impact ad revenues in Q2. Also, adverse currency movement and the suspension of its major activities in Russia will likely affect its growth.
Echoing similar sentiments, Monness analyst Brian White reduced his estimates and price target for GOOGL.
White stated that the weakening of the global economy and the challenging geopolitical backdrop could hurt digital ad spending this year. The analyst added, “In this environment, we believe cloud spending will also be held hostage to a more challenging environment, albeit still growing at a respectable rate. As such, we are lowering our estimates on Alphabet.”
White reduced GOOGL’s price target to $145 but maintained a Buy recommendation. He expects GOOGL to emerge stronger from the challenges and gain from the “long-term digital ad trends, experience healthy secular growth in the cloud, and repurchase stock at a generous pace.”
Including White, GOOGL stock has received 29 unanimous Buy recommendations for a Strong Buy rating consensus. Further, the average Alphabet price target of $158.98 implies 42.2% upside potential.
GOOGL Sports Outperform Smart Score
While GOOGL faces headwinds in the near term, it has an Outperform Smart Score of 9 out of 10 on TipRanks. Besides analysts, GOOGL stock has positive signals from hedge funds and retail investors, who have accumulated it on the recent dip.
Further, blogger sentiments also remain positive on GOOGL stock.
Bottom Line
GOOGL’s long-term growth story remains intact. The internet behemoth is well-positioned to benefit from secular tailwinds. Moreover, its investments in the cloud, AI, YouTube, and Search will likely bolster its long-term growth and support buybacks.
However, a weak macro environment, concerns over ad spending, and currency headwinds could restrict near-term growth.
