On Wednesday, Cantor Fitzgerald maintained a Neutral rating on Alphabet Inc. (NASDAQ:GOOGL), with a consistent price target of $190.00. The firm's assessment followed Alphabet's third-quarter financial results, which surpassed Wall Street's revenue and EBIT expectations by 2% and 7%, respectively, as per data from Visible Alpha.
While Alphabet's search and YouTube performance met the expectations of the buy-side, the company's operating income (OI) margin increased significantly by 450 basis points year-over-year, attributed to superior top-line growth and gross margin (GM) outperformance.
The earnings per share (EPS) for Alphabet benefited from equity mark-ups. On the earnings call, Alphabet executives highlighted significant advancements in artificial intelligence (AI)-related product and engineering areas, specifically mentioning developments in Gemini, Overviews, and Tensor Processing Units (TPUs).
The firm acknowledged the third quarter as a strong period for Alphabet but suggested that the broader narratives, both optimistic and pessimistic, surrounding the stock are unlikely to shift in the near to medium term.
Cantor Fitzgerald's analysis pointed to an upcoming event that could influence investor sentiment. The Department of Justice (DOJ) is anticipated to announce the remedies it seeks in the antitrust trial against Alphabet on November 20. This development could be a pivotal moment for the company.
The firm concluded that Alphabet's valuation appears attractive, trading at approximately 20 times the forecasted fiscal year 2025 earnings per share (FY25E P/E). Despite this, potential risks associated with antitrust litigation and AI-related challenges have led Cantor Fitzgerald to maintain a cautious stance, reiterating their Neutral rating and a 12-month price target of $190.00 for Alphabet's stock.
In other recent news, Alphabet Inc. has been the subject of several positive analyst adjustments following robust third-quarter earnings. Truist Securities raised its price target to $225, emphasizing Alphabet's strong performance in its Search, Cloud, and Devices segments, and highlighting the company's investments in Artificial Intelligence (AI) and YouTube as key growth drivers. Canaccord Genuity also increased Alphabet's price target to $225, citing strong growth in Search and YouTube segments, as well as non-advertising revenue streams.
Alphabet's third-quarter earnings surpassed Wall Street's revenue expectations across various segments, with a significant acceleration in non-advertising revenue streams, including Cloud, Subscriptions, Platforms, and Devices. Other investment firms, including Evercore ISI, Citi, Barclays, RBC Capital, and Goldman Sachs, have maintained positive ratings on Alphabet, while cautioning about potential regulatory challenges and competition in the AI space.
Alphabet's investments in generative AI have begun to show improvements in its search capabilities. YouTube's advertising and subscription revenue surpassed $50 billion for the first time in the third quarter, supported by strong growth in subscriptions driven by YouTube TV, NFL Sunday Ticket, and YouTube Music Premium. Google Cloud's revenue saw a significant acceleration, driven by the continued adoption of Gemini-powered AI products.
In addition to its financial performance, Alphabet recently led a $110 million investment in Nigerian fintech company Moniepoint, pushing the company's valuation beyond the $1 billion mark. Alphabet's new finance chief, Anat Ashkenazi, announced that the company's capital expenditures in 2025 would exceed this year's.
InvestingPro Insights
Alphabet Inc. (NASDAQ:GOOGL) continues to demonstrate strong financial performance, as reflected in both the recent earnings report and InvestingPro data. The company's revenue for the last twelve months as of Q2 2024 stood at an impressive $328.28 billion, with a robust revenue growth of 13.38% over the same period. This aligns with the strong third-quarter results mentioned in the article.
InvestingPro Tips highlight Alphabet's financial strength, noting that the company "holds more cash than debt on its balance sheet" and that its "cash flows can sufficiently cover interest payments." These factors contribute to the company's stability and ability to invest in AI and other growth initiatives, as discussed in the earnings call.
The article mentions Alphabet's attractive valuation, trading at approximately 20 times forecasted FY25 earnings. InvestingPro data supports this view, showing a current P/E ratio of 24.38 and an adjusted P/E ratio of 23.12 for the last twelve months as of Q2 2024. An InvestingPro Tip also notes that the stock is "trading at a low P/E ratio relative to near-term earnings growth," suggesting potential upside.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Alphabet, providing a deeper understanding of the company's financial position and market performance.
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