On Thursday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Alphabet Inc. (NASDAQ:GOOGL), reducing the tech giant’s price target from $235 to $230, while still affirming an Outperform rating on the shares. The revision was prompted by mixed financial results, with Alphabet’s advertising revenues surpassing expectations, but its Google Cloud division exhibiting weaker performance. Mizuho analyst James Lee highlighted that the shortfall in cloud revenue was due to capacity constraints, suggesting potential for growth acceleration later in the year as these issues are resolved. According to InvestingPro data, Alphabet maintains a "GREAT" financial health score and generates impressive revenue of $350 billion, with a robust gross margin of 58.2%.
Lee also noted that Alphabet’s operating income met projections and that the company’s capital expenditures (capex) for the fiscal year 2025 were significantly higher than anticipated. This increase in capex is seen as a positive sign for the long term, reflecting management’s confidence in artificial intelligence (AI) and the cost benefits of custom application-specific integrated circuits (ASICs). InvestingPro analysis reveals the company’s strong financial position, with more cash than debt on its balance sheet and sufficient cash flows to cover interest payments - just two of the 12 key ProTips available to subscribers.
The report further mentioned that Alphabet is expected to enhance productivity by continuing to manage its headcount effectively and by optimizing its real estate (RE) footprint. Despite the adjustments, Mizuho’s outlook remains positive, with the belief that Alphabet’s strategic investments will pay off.
In light of these factors, Mizuho has made a slight revision to its fiscal year 2026 earnings per share (EPS) estimate, lowering it from $10.61 to $10.52. The new price target of $230 is based on a 22x multiple of the revised GAAP EPS estimate for fiscal year 2026. This adjustment reflects a nuanced view of Alphabet’s financial health and market position, taking into account both the current challenges and the potential for future growth. InvestingPro’s Fair Value analysis suggests the stock is currently fairly valued, with 15 analysts recently revising their earnings expectations downward. For deeper insights into Alphabet’s valuation and growth prospects, including exclusive ProTips and comprehensive financial analysis, explore the full Pro Research Report available to subscribers.
In other recent news, Alphabet Inc. has been the subject of several analyst adjustments and significant investment news. The tech giant recently saw Google and SoftBank (TYO:9984) Group Corp. invest in Boston-based quantum computing startup QuEra Computing Inc., which raised $230 million in a funding round. This investment underscores the growing interest in the practical applications of quantum computing.
TD Cowen has revised its price target for Alphabet to $220, maintaining a Buy rating despite mixed performance in Alphabet’s various business segments. RBC Capital, on the other hand, continues to hold an Outperform rating for Alphabet, with a steady price target of $235. Meanwhile, UBS and Truist Securities have reduced their price targets to $209 and $220 respectively, while keeping their ratings at Neutral and Buy.
These adjustments follow Alphabet’s recent earnings report and increased capital expenditure guidance for 2025. Analysts from these firms highlighted Alphabet’s commitment to enhancing its AI capabilities, and the potential impact of these advancements on the company’s future growth. These are recent developments that investors should be aware of, as they could influence the company’s financial and market performance.
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