Today's surge in Alphabet's shares can be attributed to...
Alphabet's shares soared, climbing as much as 3.4% today, before dipping to a 2% gain as of 3:04 p.m. ET, outpacing the Nasdaq Composite. This surge was fueled by several factors, including outstanding AI server numbers from Hon Hai Precision and a positive note from Wall Street analyst Doug Anmuth at J.P. Morgan.
Anmuth, who maintains a buy rating on Alphabet shares, issued a bullish note on Monday, setting a price target of $232. Given Alphabet's current trading price around $193, this target indicates a potential 20% increase. Anmuth's optimism is rooted in Alphabet's established position in AI, a tech domain that previously sparked concerns about the potential disruption of the search business. However, Anmuth views Alphabet as a driver and beneficiary of AI advancements, as evidenced by the positive reception to its Gemini 2.0 large language model.
Alphabet's search business is also expected to continue its growth trajectory, with Anmuth projecting an 11% increase this year. Beyond search, Alphabet's cloud business and YouTube subscriptions present untapped potential for growth. Moreover, Anmuth suggests that some of Alphabet's "moonshot" projects, like Waymo and Verily, could be edging closer to profitability, as indicated by the 43% revenue increase in the first nine months of 2024 with minimal increase in operating losses.
Additionally, thanks to the court's recent antitrust ruling, Alphabet has been assigned a relatively low valuation of 22 times this year's earnings estimates, making it the cheapest of the "Magnificent Seven." Despite this, Anmuth suggests that any potential penalty by the Justice Department could be less severe than anticipated, which may further boost Alphabet's stock price.
In summary, despite certain challenges such as increased spending on AI infrastructure and decelerating Cloud revenue growth, analyst Doug Anmuth remains optimistic about Alphabet's long-term prospects. His bullish outlook is based on the company's solid advertising growth, ongoing AI investments, and potential profitability of its "moonshot" projects.
Alphabet's bullish outlook in the finance sector is largely influenced by Wall Street analyst Doug Anmuth's positive note, signaling a potential 20% increase in Alphabet's share price. Anmuth believes that Alphabet's investing in AI will drive profitability, as evident in the positive reception of its Gemini 2.0 large language model. Despite the Nasdaq rallying, Alphabet's shares outperformed, boosted by precision AI server numbers and Anmuth's optimism.
