Internet giant Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG) will be reporting its second quarter GOOGL earnings on July 25, after market close. Wall Street analysts remain upbeat about GOOGL stock ahead of the Q2 print and expect the company to deliver better-than-expected quarterly numbers due to the strength in Search and momentum in the Cloud business.
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Q2 Expectations for GOOGL
Analysts expect GOOGL to report revenue of $72.84 billion in Q2, reflecting an improvement on a year-over-year and sequential basis. The company delivered revenue of $69.79 billion in Q1 of 2023 and $69.69 billion in the second quarter of 2022.
The improvement in its top line will come from higher Google Search & other revenues. Further, the momentum in Google Cloud revenues will support its top-line growth. Notably, cloud revenues increased by 28% in Q1.
Thanks to the higher revenues, analysts project GOOGL’s earnings to increase on a year-over-year and sequential basis. Wall Street expects Alphabet to report earnings of $1.34 a share, compared to an EPS of $1.21 in the prior-year quarter. This compares favorably to the earnings of $1.17 per share in Q1 of 2023.
Analysts Lift GOOGL’s Price Target Ahead of Earnings
Several analysts raised Google stock’s price target ahead of the Q2 earnings. On July 21, Stifel Nicolaus analyst Mark Kelley increased Alphabet’s price target to $135 from $130. Kelley is bullish about GOOGL stock. The analyst sees a slight improvement in digital advertising trends, which will benefit Alphabet.
Prior to Kelley, Bank of America Securities analyst Justin Post raised GOOGL stock’s price target to $142 from $128 on July 19. Post expects Alphabet to benefit from stable search share trends.
Further, Jefferies analyst Brent Thill expects the company to exceed analysts’ consensus estimates for Q2. In a note to investors dated July 18, Thill said that his checks suggest higher ad spend growth in the second quarter. Thill added that Alphabet’s valuation is “low” and expects an improved ad spending environment in the second half of 2023. Thill has a price target of $150 on GOOGL stock.
Justin Patterson of KeyBanc expects a reacceleration in revenue growth in Q2 and sees Street’s earnings forecast as conservative. The analyst raised Alphabet’s price target to $140 from $122 on July 18. Moreover, the analyst maintained a bullish outlook on Alphabet stock ahead of Q2 earnings.
The AI Opportunity
Analysts view Alphabet as the leading player in the AI (Artificial Intelligence) space. Alphabet has made considerable investments in AI, which will open up significant growth opportunities in search, ads, and other businesses.
Tigress Financial analyst Ivan Feinseth reiterated a Buy recommendation on GOOGL stock on July 14. Feinseth believes that “the increasing integration of AI functionality will continue to drive its leadership position across all key technology trends and business lines.”
His price target of $172 implies a stellar 43.31% upside potential in GOOGL stock from current levels.
Is Alphabet Stock a Buy Now?
Alphabet is well-positioned to capitalize on the recovery in ad spending. Meanwhile, its AI advancements and strength in the cloud business bode well for future growth. Alphabet stock sports a Strong Buy consensus rating ahead of Q2 earnings, reflecting 27 Buy and five Hold recommendations.
While GOOGL stock has appreciated quite a lot, analysts’ average price target of $136.60 per share implies 12.4% upside potential from current levels.
Options Activity Highlights 6% Earnings-Related Move
While analysts are bullish, the option traders are pricing in a 6.04% move on earnings, which is higher than the average -0.3% move in the last eight quarters.
Learn more about TipRanks’ option tool here.
