Canaccord Genuity (TSX:CF, LSE:CF) analysts increased their target price on Alphabet Inc (NASDAQ:GOOG) to $3,500 a share from $3,350, with a ‘Buy’ rating, citing “strong” advertising trends and a stock split, which they said should boost sentiment for the tech giant.
The company’s board of directors approved a 20-1 stock split in an effort to make its shares more accessible to investors, which will be implemented as a one-time special stock dividend issued after the market close on July 15, 2022.
“Ongoing innovation across the company’s advertising and cloud businesses is fueling strong growth from both new and existing customers, and the stock split, coupled with healthy share repurchases ($50B in 2021) and a reasonable valuation, should support investor sentiment despite recent volatility across the tech sector,” the analysts said.
Alphabet’s fourth-quarter advertising revenue grew about 33% year over year, about 5% ahead of expectations, "thanks to a strong backdrop amid the holiday season and its relative insulation from privacy headwinds".
“Retail was once again the largest contributor to growth, complemented by strength from financial services and media & entertainment along with a continued rebound in travel spend,” they added.
The Canaccord Genuity (TSX:CF, LSE:CF) analysts also cited continued momentum for Google Cloud revenue, which rose about 45% year over year to $5.5 billion during the quarter, as the division’s growth outpaced that of the overall business, along with an all-time quarterly sales record for Pixel 6 despite ongoing supply chain challenges.
“Google plans to continue investing across the business, with an emphasis on AI, noting that it anticipates robust headcount growth in 2022 as well as a meaningful increase in CapEx to support Cloud growth,” the analysts wrote.
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