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Google parent Alphabet remains AI-driven growth story amid investor disappointment over 4Q results

Published 2024-01-31, 12:32 p/m
© Reuters.  Google parent Alphabet remains AI-driven growth story amid investor disappointment over 4Q results
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Proactive Investors - Google parent company Alphabet (NASDAQ:GOOGL) Inc (NASDAQ:GOOG)'s fourth quarter results may have disappointed investors but analysts at Wedbush remain bullish on the stock, reiterating their ‘Outperform’ rating and $160 price target.

“Alphabet reported health 4Q results with total revenue 1.3% above consensus and operating income (excluding one-time expenses) modestly ahead of expectations,” the analysts wrote in a note to clients.

This wasn’t enough for investors, who sent Alphabet’s shares down 6.3% at $143.40 at noon on Wednesday.

The Wedbush analysts noted that the shares were seeing pressure due to elevated expectations heading into the print following Alphabet's recent strong performance and a slight miss on consolidated advertising revenue due to weaker Network revenue.

They also pointed to rising capital expenditures (capex), with Alphabet’s 4Q capex coming in about $600 million above the consensus expectation and management indicating a notable increase in spending levels in 2024.

The analysts wrote that their thesis on Alphabet was unchanged following its earning report.

“Google remains a dominant digital advertising business with healthy underlying growth and significant optionality related to AI across both its advertising and Cloud segments,” they wrote.

“Given the company's continued focus on cost discipline, operating margin should continue to modestly improve in the coming quarters and we expect about 120 basis points of margin expansion this year.”

They also highlighted positive readthroughs for fellow tech giants Amazon.com Inc (NASDAQ:AMZN, ETR:AMZ) and Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB), who are both reporting after Thursday’s closing bell, following Alphabet’s results.

“We are encouraged by performance across Google Search and YouTube, which we think indicates a healthy digital advertising backdrop, in line with our expectations heading into results,” the Wedbush analysts wrote.

“Earlier this month, our digital advertising survey and commentary from leading ad agencies suggested digital advertising strength in the quarter was weighted towards retail media and social channels, and we believe those segments continue to represent the most significant opportunity for near-term upside relative to Street estimates.”

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