Alphabet will report second-quarter earnings after the market close on Tuesday, making it one of the first companies among the “Big Seven” to announce results this earnings season. For the period ending June 30, analysts polled by London Stock Exchange Group (LSEG) expected the parent company of Google and YouTube to earn $1.84 per share on revenue of about $84.2 billion. Compared with the same period last year, earnings per share increased by 28% and revenue increased by 13%. Alphabet beat Wall Street expectations when it reported first-quarter results in April, earning $1.89 per share on revenue of $80.54 billion. Several analysts expect Alphabet to beat estimates this quarter as well, with many reiterating buy ratings and raising price targets on the stock ahead of Tuesday’s report. “We expect second-quarter results to be in line with expectations or even slightly better,” wrote Baird analyst Colin Sebastian, who gave the world’s leading Internet search engine company an overweight position. Rating. “Specifically, our search and YouTube checks are generally positive, and we expect solid growth in cloud computing, as well as positive management commentary on GenAI adoption and Gemini progress. Search competition remains a key area of long-term focus for investors Wolfe Research expects Google’s search revenue to grow 12.6% compared with the same period last year. Overall, the company expects revenue and profits to be “basically in line” with expectations. Wolfe has an Outperform rating on Alphabet and a price target of $240, which would imply an upside of more than 32% from Monday’s closing price. Analyst Shweta Khajuria cited company size, investments in artificial intelligence, category leadership and product catalysts as drivers. Deutsche Bank, Bank of America and TD Cowen all raised their pre-earnings price targets on the stock. Deutsche Bank analyst Benjamin Black pointed to broader digital advertising strength and generative artificial intelligence enhancements as reasons for expected second-quarter growth in Alphabet’s search and YouTube businesses. The investment bank cited strong advertising markets, artificial intelligence-driven upside and signs of management’s increasing cost discipline as reasons to remain bullish on Alphabet, raising its price target by $5 to $195 while reiterating a buy rating. Bank of America analyst Justin Post focuses on the growing integration of artificial intelligence in the Alphabet ecosystem. He said a wider rollout of the AI overview would help spur more search activity. While Post believes the use of AI poses a long-term competitive risk, increased revenue from AI-driven monetization improvements will be the main takeaway from print in the second quarter. Bank of America recently reiterated a buy rating on the stock while raising its price target by $6 to $206, about 13% above Monday’s closing price. For TD Cowen, strong growth in search spend is expected in the second quarter – a sign of a healthy digital advertising environment – coupled with the company’s belief that YouTube may still be gaining share among younger viewers, prompting a more optimistic stance. The bank raised its price target to $220, which would imply an upside of more than 21% from Monday’s closing price. “We believe Google is the best-positioned mobile ad company due to its leading mobile ad revenue position, strong capabilities, and relative positioning relative to peers,” said analyst John Blackledge, who has a buy rating on Alphabet. “GOOG’s advertising services combined with its competitive cloud franchise creates a digital powerhouse and is expected to achieve double-digit annual revenue growth over time.” Moving forward, annual EBITDA will achieve similar double-digit growth. On a more negative note, Rosenblatt Securities analyst Barton Crockett estimates that Alphabet’s total sales will be about 1% lower than Wall Street consensus, mainly due to search, YouTube and Internet. Compared with first-quarter results, Rosenblatt expects second-quarter results to be stronger and advertising trends to slow “inversely.” Rosenblatt has a neutral rating on Alphabet and a price target of $181 – about where the stock closed on Monday. GOOGL mountain 2024-07-22 Alphabet, Bernstein 2-day analyst Mark Shmulik also chose to remain neutral, rating Alphabet a performer. While analysts see Alphabet’s second-quarter earnings setup as “very similar” to the first, the difference now is that the stock has “largely moved away” from the risks of generative artificial intelligence. Looking ahead, Shmulik expects the Justice Department to issue a “potentially adverse” ruling on the company’s monopoly on search and search advertising “in the coming weeks.” “The layoffs and consolidation efforts earlier this year should support near-term margins,” Schmulik wrote. “However, higher GenAI infrastructure and longer-term talent costs may put pressure on [operating expenses]Regulatory and legal costs are likely to continue to mount as the DOJ Network case begins in September.
