Shares of tech heavyweight Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) are down at the time of writing after UBS’ downgrade from a ‘buy’ to a ‘neutral’ rating. The downgrade is linked to UBS’ prediction of high-single-digit growth for Google Sites revenue, stating there might be limited room for additional growth. UBS also flagged the potential medium-term revenue risk as generative AI responses might replace some advertising spaces.
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UBS analyst Lloyd Walmsley, however, is less concerned about the costs of generative AI than previously, despite an uptick in capex guidance last quarter. In terms of competition, Walmsley doesn’t see Bing from Microsoft (NASDAQ:MSFT) or ChatGPT from OpenAI as significant threats to Google due to its superior product offering. Nevertheless, a slight ‘tail risk’ could emerge from Meta (NASDAQ:META) and its AI chat platform. Interestingly, even amidst these concerns, Walmsley increased his target price per Alphabet share from $123 to $132, maintaining a ‘balanced’ view on risk versus reward.
Turning to Wall Street, analysts have a Strong Buy consensus rating on GOOGL stock based on 27 Buys, four Holds, and zero Sells assigned in the past three months, as indicated by the graphic above. Furthermore, the average price target of $131.79 per share implies 9.46% upside potential.
