Google parent Alphabet (GOOG) will deliver its Q2 earnings later this week.
GOOG – Daily Chart
GOOG shares have recovered from their April lows below $150 and now trades at $190. The larger resistance is at $208.55.
Alphabet’s latest results come at an important delicate time for the company as analysts question the company’s investment into AI ventures. Analysts expect to see a strong quarter from Youtube and the company’s Cloud business.
Truist Investment’s Youssef Squali said that search demand was probably solid, and any AI competition is likely already priced into the stock.
“Concerns over AI evolution in Search and regulatory pressures to a lesser degree have weighed on Alphabet,” he said.
“We believe that current valuation reflects much of those concerns, and that AI Search remains Google’s war to lose”.
Alphabet shares are still down by -2% this year, despite a healthy rally from the April lows. There are concerns about increasing competition from AI-driven chatbot alternatives like OpenAI’s ChatGPT and Anthropic’s Claude. Both have the potential to take search traffic away from the company.
Some analysts are bearish, such as Bank of America, where analysts have said the AI competition could drag on Alphabet’s click-through ad revenue. Concerns have also surfaced about Alphabet’s legal issues after recent setbacks in antitrust cases.
Bullish analysts say the company’s huge collection of first-party user data and its long relationships with publishers could be a strength as AI content grows.
Meanwhile, segments like Cloud, YouTube, and autonomous vehicle company Waymo are seen as undervalued contributors to Alphabet’s long-term value. Morgan Stanley recently raised its price target on Alphabet from $185 to $205. The investment bank said the key was whether Alphabet can achieve more than $10 in earnings per share by 2026. Alphabet’s earnings call will also be scrutinized for news of antitrust investigations.
Billionaire investor Bill Ackman is obviously bearish on GOOG after he sold 772,000 shares of Alphabet, cutting his position by 7%. Ackman used the proceeds to buy 30 million shares of Uber, which is now the largest holding in his portfolio at 19%.
Ackman talked about the firm on social media, saying Uber was “one of the best-managed and highest-quality businesses in the world”.
