With a market cap of $2.4 trillion, Alphabet Inc. (GOOGL) has evolved from a search-engine giant into a diversified technology conglomerate spanning cloud computing, digital advertising, autonomous vehicles, and healthcare. It dominates the online search market with over 94% share, benefiting from increasing search queries and advertiser activity. The company is also expanding its presence in cloud computing through Google Cloud and strengthening its position in autonomous vehicles with Waymo.
Shares of the internet search leader have outperformed the broader market over the past 52 weeks. GOOGL has rallied 32.6% over this time frame, while the broader S&P 500 Index ($SPX) has gained 23.3%. On a YTD basis, shares of GOOGL are up 6.1%, compared to SPX’s 3.3% gain.
Focusing more closely, the Mountain View, California-based company has slightly outpaced the Communication Services Select Sector SPDR ETF Fund’s (XLC) 32.3% return over the past 52 weeks.
Shares of Alphabet rose 2.8% following its Q3 earnings release on Oct. 29, driven by a 35% surge in its cloud business, which reached $11.4 billion. The company also exceeded profit expectations with earnings of $2.12 per share. YouTube ad revenue was boosted by election-related spending, contributing to a 10% increase in Alphabet's digital advertising sales, totaling $65.9 billion. Additionally, Alphabet's total revenue for the quarter grew 15% to $88.3 billion, above analysts' expectations.
For fiscal 2024, which ended in December, analysts expect GOOGL’s EPS to grow 38.3% year-over-year to $8.02. The company's earnings surprise history is promising. It topped the consensus estimates in the last four quarters.
Among the 50 analysts covering the stock, the consensus rating is a “Strong Buy.” That’s based on 39 “Strong Buy” ratings, three “Moderate Buys,” and eight “Holds.”
On Jan. 30, Oppenheimer analyst Jason Helfstein raised Alphabet's price target to $225, maintaining an “Outperform” rating, citing strong advertising trends and the positive impact of generative AI on ad prices. The firm also highlighted that Alphabet could become a more attractive alternative to Meta if investors have concerns about Meta's revenue outlook or EPS growth through 2025.
The mean price target of $217.35 represents a premium of nearly 9% to GOOGL's current levels. The Street-high price target of $240, implies a potential upside of 20.4% from the current price levels.
