Here's what all the major analysts are saying about Alphabet before earnings

Published Tue, Oct 24 202310:06 AM EDT

Wall Street is optimistic ahead of Google 's quarterly earnings announcement Tuesday as the tech giant's advertising revenue growth shows signs of recovery. Google has remained more under-the-radar compared with some of the other FAANG names. Nonetheless, it is a top name in the AI arms race. It has invested heavily in generative artificial intelligence throughout the year, such as through its Bard AI platform , its competitor to ChatGPT. The company also unveiled its AI-powered platform Search Generative Experience , which marks one of the largest changes to its search engine. The rollout of the new search experience has raised concerns from website publishers, however, who worry that it could hurt traffic to their websites. The outlook of its search business also has been pressured by concerns that the digital ad market will be hurt by weakness in the economy. Even so, shares have rallied about 12% since it reported its second-quarter earnings in late July. That has outpaced the S & P 500's decline of about 7.5% over the same period. It is one of the best-performing large-cap tech names of 2023, up 55.2%. The company will post its third-quarter results Tuesday after the bell. Analysts are forecasting earnings of $1.45 per share on revenue of $75.97 billion, according to LSEG, formerly known as Refinitiv . Google has managed to beat earnings and revenue consensus estimates for 13 of the past 20 quarters, according to StreetAccount. Investors will be keeping a close eye on Google's search revenue growth, progress with the rollout of its generative AI tools and advertising revenue from YouTube. Ahead of Google's quarterly announcement, several Wall Street analysts are staying optimistic, with some also notching up their forecasts. GOOGL YTD mountain Google shares have outperformed in 2023 Deutsche Bank ticks up price target Deutsche maintained its buy rating on shares, while raising its price target by $5 to $145. The new price target implies nearly 7% upside potential from Monday's close. According to the firm, ad checks indicate that Google's Search segment "remains resilient." "We believe the setup for the stock is constructive despite having rallied ~7% since the 2Q print, given a resilient ad market and opex discipline could provide upside to 3Q results." JPMorgan remains overweight Analyst Doug Anmuth said he's staying positive on Google, and reiterated his overweight rating and $150 price target on shares. "We believe the online ad market was solid in 3Q, which combined w/easier comps should drive acceleration in Search revenue growth to +10% Y/Y reported (from +5% in 2Q) & in YouTube ads revenue growth to +9% Y/Y reported (from +4% in 2Q)." Citi maintains buy rating Citi said Google's generative AI innovation strategy is now in place, allowing the company to focus on growth initiatives on these investments. Analyst Ronald Josey estimates search revenue growth gained 11.3% year-over-year, versus the consensus projection of 9.6%. The firm kept its buy rating and price target of $153, which, if reached, would send shares nearly 13% higher. "We do believe Google's core Search business strengthened in 3Q as the online advertising environment improved (based on our checks) and we look for modest GenAI tailwinds to GCP growth each quarter going forward as expense controls should lead to expanding margins." Bank of America sees search growth accelerating Bank of America also maintained its buy rating and $146 price target. To be sure, the bank remains constructive on the benefits from its AI products, citing a modest overhang that remains on potential search revenue disruption during the integration process. "We think, with increasing advertiser adoption of Performance Max, and the ramp of AI driven products like dynamic keyword campaigns, AI will be incrementally positive to Google's ad sales in 2H'23. We expect, with search growth accelerating, Google's core business will show strong margin leverage in 2H'23, and cost efficiencies in 2024 could drive upside to Street estimates. Next big event could be launch of Gemini, which is projected to have superior LLM performance and could help with the AI narrative." Jefferies expects a slight beat Jefferies has one of the higher price targets among the big banks of $165 — which implies shares will jump nearly 22% from Monday's close. Despite the stock's outperformance in 2023, its valuation still remains reasonable, according to analyst Brent Thill. The firm has a buy rating on shares. "We believe GOOGL can grind higher even after a 58% YTD gain, thanks to: slowly accelerating ad rev growth on easing comps, supported by positive checks and notable strength in search; Cloud rev benefiting from putting peak cost optimization behind and AI tailwinds contributing in '24-'25; and valuation still reasonable at 12.2x CY24 EV/EBITDA, or roughly on par with 12.1x 10-yr avg and S & P 500's 12.3x." Wells Fargo forecasts a rocky 2024 Wells Fargo is more bearish on Google compared to other names on Wall Street. The firm reiterated its equal weight rating. While it ticked up its price target by $5 to $126, that implies shares pulling back 7% from where they closed on Monday. "We believe that the upcoming format transition to conversation search brings significant uncertainty to the search market. We expect disruption with the format change, which will likely drive headwinds to medium-term search growth. Competitors are likely to bid aggressively for Google's search distribution partnerships, driving profitability lower. Even if Google maintains search leadership, we do not expect the company to replicate its prior prosperity in the next decade." —CNBC's Michael Bloom contributed to this report