When you’re as big as tech giant Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), you not only tend to become a target, but you also offer risks as big as rewards. A recent report from Jefferies suggests that the stock may actually hold up better than most going into a slumping economy. This sentiment struck a chord with investors, as Alphabet is up somewhat in Friday afternoon trading.
The word from Jefferies analyst Brent Thill notes that there are some similarities between what we’re seeing right now and what we saw back in 2008 with the Great Recession starting up. While Thill isn’t going all out for Alphabet, he is “tactically cautious” about the stock’s long-term chances. With the stock trading below historical averages, a likely upswing may not be too far away. It helps that Alphabet provides a useful service to businesses. Search-based advertising can be tightly focused and thus offer a solid return. That’s true even in a slumping economy.
There is reason for optimism, certainly. Yet, there’s also reason for caution. For example, Google is about to face a Department of Justice lawsuit over its advertising practices. Indeed, the very ones that might have helped it in a down economy. Further, Alphabet suffers already from an advertising slowdown. Not only is a slowdown kicking in, but Alphabet is also facing increasing difficulty from new players with an active interest in taking on the market. Alphabet also doesn’t need the combined threat of a DoJ lawsuit hitting at a time when AI is about to fundamentally alter the search market.
Regardless of Jefferies’ caution, Wall Street as a whole is strongly behind Alphabet stock. Analyst consensus calls it a Strong Buy with an average price target of $123, implying 21.16% upside potential.