Google Vulnerable to Reduced Ad Spend, Says 5-Star Analyst

Alphabet’s (GOOGL) Google takes the last letter among FAANG stocks and indeed in 2020 it is currently in last place among its peers where market performance is concerned. While some tech giants have been notching all-time highs almost every other day recently, Google has relatively underperformed. That said, the internet giant is only a touch away from its all time highs of $1,530 per share, and with a 12% gain year-to-date, it is way too early to call in the search engine doctor.

However, Brian White, analyst at investment firm Monness, notes other areas Google needs to keep a close eye on.

“For the foreseeable future,” said the 5-star analyst, “We anticipate Alphabet will struggle with weak digital ad spending trends and other headwinds.”

The recent ad boycott on Facebook, while yet to impact Google, does leave other platforms vulnerable to further boycott action, with YouTube, according to White, the most at risk from a wider ban. On the flip side, with ad spend on Facebook reduced, companies’ ad budgets could be siphoned off in other directions, which could be beneficial to Google.

Still, with COVID-19 showing no signs of retreating just yet, slashed ad budgets could be a theme for the foreseeable future. A post-COVID world could usher in changes that might not have been considered in the pre-pandemic climate.

“Given the weak economic environment and the expansion of this COVID-19 crisis across more parts of the country, a pause in spending could turn into something that lasts longer than expected given a lack of urgency to return to previous spending levels. Moreover, there is a risk that some companies spending less on advertising, notice little impact on revenue from their cutbacks, resulting in less ambitious ad spending budgets in the future,” White summarized

All in all, White maintains a Buy rating along with a $1,420 price target. Therefore, the analyst anticipates shares declining by 5.5% over the coming months. (To watch White’s track record, click here)

Most on the Street keep a Buy rating, too – in fact, 29 out of the 31 analysts to post a Google review over the last 3 months suggest just that – with the remaining 2 recommending a Hold. GOOGL’s strong Buy consensus rating is backed by a $1,527.66 price target – suggesting an all-time high is possible, although the figures implies a modest upside of 2% from current levels. (See GOOGL stock analysis on TipRanks)

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