Alphabet (NASDAQ:GOOG)
Loop Capital downgraded Alphabet stock on Monday. This comes after Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) stock moved higher last week after its I/O developer conference and the “structural uncertainties” around artificial intelligence.
Analyst Rob Sanderson said in a note to clients, “We think Google’s I/O event opened some eyes to the company’s strong position in AI, reflected in last week’s 11% gain in the stock (S&P500 down 0.3%).” However, Sanderson also noted that doubts about the company’s ability to “maintain its dominant position through this massive technology transformation” would keep the stock’s valuation in check.
Sanderson changed his recommendation on Alphabet stock from buy to hold. However, he maintained his price objective of $125 per share for the stock.
In trading before the market’s opening on Monday, Alphabet stock declined by around 1%.
Sanderson said that the danger of displacement due to behavioral changes is really a greater concern than the possibility that Microsoft, which has been considered by some as a serious rival in the search sector, is actually a lower threat. On the other hand, Google may reduce expenses more quickly than expected. It may repurchase as much as $120 billion in shares between now and 2024.
The aforementioned “structural uncertainties” will likely make investors “nervous” as the space changes, which puts a cap on the stock’s value. Despite this, the stock’s price may remain relatively stable.
In the memo, Sanderson said that the company was “comfortable with Google’s ability to once again win on product and maintain a reasonably similar share of search activity.”
Although management sees the spread of AI as analogous to the advent of mobile devices, we do not share this view. This is far more than just a change in platform.
Sanderson said that ad spending has held up better than anticipated, YouTube is “inflecting positively,” and rising interest in artificial intelligence (AI) would likely boost traffic to Google’s cloud servers.
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