Google-parent Alphabet is beating the market by a long shot — but a lofty valuation and legal risks in Europe are dampening opportunities for investors, according to CFRA analyst Scott Kessler.
Kessler took the stock down a notch on Friday, from "strong buy" to "buy," citing the stock's nearly 26 percent rally so far this year, beating the S&P 500's rise of almost 9 percent.
But while the stock is "attractively valued," it is not "compellingly priced," he wrote.
"The primary reason is pretty simple — our target price is $1,070," Kessler told CNBC. "With the stock a shade under $1,000, that's roughly 7 percent upside.. ... With the sentiment
European anti-trust regulators are expected to rule in the "next few months" on whether Google has become too dominant in areas like search,
"Definitely something that's looming, potentially significant, and not seemingly concerning to most," Kessler told CNBC. "If the EC proceeds with penalties — people are aware of the size of that fine, and that Google has more than enough funds .... to cover that. I don't know that the financial fines would be the most significant negative. I do think that something like that could very well have a chilling effect of Google's, and Alphabet's, ability to be more aggressive on a number of different fronts. At the least, that should be
But Price said there's a "very healthy" broad-based improvement in the technology market, as stocks such as Facebook and Alphabet fall in and out of favor compared with stocks such as semiconductor companies, as long as the economy stays "in recovery mode."
Dan Morgan, a portfolio manager at Synovus Trust, pushed back at the idea that Alphabet shares are "too exorbitant."
"You look at Google, you look at Amazon, those are the big names, those are the stocks looking to hit $1,000 a share," Morgan told "Squawk Alley" on Friday. "I wouldn't be surprised if you continue to see momentum in that group, going forward. There's not much to stop them, that I can see."