Alphabet Inc. Expected to Beat Expectations in Upcoming Earnings Report

Analysts at Jefferies anticipate Alphabet Inc. to surpass consensus expectations in its upcoming earnings release, despite the stock already seeing a 58% increase in 2023.

The tech giant is predicted to report a strong finish to the year, with Jefferies’ checks indicating positive trends in ad budgets, consumer spending, and enterprise sentiment. These factors are expected to contribute to Alphabet’s positive performance.

Google Cloud Backlog Shows Improvement, AI Revenue Still in Early Stages

Jefferies’ research also reveals an improving backlog for Google Cloud. Although it is still early in terms of AI revenue generation, the firm remains optimistic about the overall prospects of the cloud division.

The peak of cloud cost optimization is believed to have passed, as buyer sentiment now focuses on cloud transformation and data modernization in preparation for AI deployments. While the pace of these developments may be gradual, Jefferies expects revenue inflection to occur in the latter half of 2024.

Jefferies Maintains Buy Rating on GOOGL, Raises Price Target

Despite Alphabet stock’s already healthy 58% return in 2023, Jefferies maintains its Buy rating on GOOGL and raises the price target to $170 from $165 per share. The firm believes that the stock’s valuation remains reasonable, considering its performance compared to other FAANG stocks.

Alphabet’s Valuation Remains Attractive, Positioned for Continued Growth

Alphabet’s valuation, as measured by CY24 EV/EBITDA, is deemed reasonable by Jefferies at 12.1x. This valuation is similar to the stock’s 10-year average but slightly lower than the S&P 500’s valuation.

Jefferies anticipates that Alphabet can continue to grind higher in 2024 based on the increasing demand for ad spend and the positive outlook for Google Cloud. The firm sees these factors as drivers for further growth in Alphabet’s stock.

Conclusion

In conclusion, Jefferies remains optimistic about Alphabet Inc.’s upcoming earnings report. The firm expects the tech giant to outperform expectations and sees potential for continued growth in Alphabet’s stock in 2024. The positive trends in ad budgets, consumer spending, and cloud transformation support Jefferies’ bullish stance on GOOGL. With an attractive valuation and improving prospects for AI revenue, Alphabet Inc. appears well-positioned for further success.

Analyst comment

Positive news. The market is expected to respond positively to Alphabet Inc.’s upcoming earnings report, with potential for continued growth in 2024. Strong performance in ad budgets, consumer spending, and cloud transformation support this outlook. Jefferies maintains a Buy rating and raises the price target on GOOGL, highlighting the attractive valuation and improving prospects for AI revenue.