Analysts at Oppenheimer remain bullish on Alphabet Inc (NASDAQ:GOOG), Google’s parent company, despite several recent downgrades from other brokers.
In a note to clients, they stated that the recent bout of negativity around the stock was “missing the forest for the trees” with the Street's estimates already assuming a bear case for fiscal 2024.
They highlighted several reasons to remain bullish on the stock, firstly, that it has underperformed its mega-cap peers such as Amazon, Meta, and NVIDIA, but performed largely in line with Apple and Microsoft on a three-month basis, supporting its valuation.
Additionally, the Street’s outlook for the stock is reasonable, the analysts noted.
“We believe Street estimates not properly factoring estimated $3.6 billion in annual savings from 12,000 layoffs and 1Q's $2.6 billion in one-time severance and real estate expenses,” they wrote.
Concerns around Google’s AI initiatives have also been overblown, the analysts believe.
They pointed to SMWB data that shows increased Bing usage has not impacted Google Search volume, implying Bing and ChatGPT have “not been cannibalistic.”
As such, Oppenheimer’s analysts reiterated their ‘Outperform’ rating and maintained their $145 price target. Alphabet’s shares are currently trading hands for $120.
Their target price of 20 times their earnings per share (EPS) estimate for 2024 is at a steep 49% discount to peers, the analysts wrote.
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