By Capital.com news
Tech giant, Alphabet (GOOGL) faced a harsh 2022, from the rise of ChatGPT and the fear it will start taking market share from Google. Additionally, as tech stocks suffered fromhigh inflation and market tourmoil,Alphabet shed 39% of its stock price last year, compared with the tech-heavy S&P 500 Index (US500) which lost 19% of its value.
However, the tables appear to have sinceturnedfor the company that owns the world’s largest search engine. As of 30 May, GOOGLstock price wasup almost 40% year-to-date (YTD).
What lies ahead for the tech giant for the rest of2023? Will its gains continue or is a reversal inevitable? In this article, we take a look at Alphabet’s financial fundamentals, the latest news surrounding the company, and the Google stock forecast for the short and long term.
Alphabet share price
What is Alphabet?
On 10 August 2015, Larry Page, one of Google’s co-founders, published the blog post G is for Google, in which he announced the restructuring of one of the world’s biggest companies. Page mentioned the need to make the company cleaner and more accountable through a new publicly traded entity. That company became Alphabet.
The new name was chosen to reflect the sentiment of ‘alpha-bet’ (Alpha implies investment return over benchmark).
On 2 October 2015, both classes of Google shares began trading on Nasdaq as GOOGL and GOOG fully converted into the same number of shares with the same rights, making Google a wholly owned subsidiary of Alphabet.
Alphabet remains the holding company for more than 160 subsidiary companies, the largest being Google.
Google historical price analysis
The Covid-19 pandemic, and subsequent global lockdowns saw many people begin working remotely, this led to a steep upward trendin the Google stock priceas companies and individuals became more reliant on technology to communicate over a distance.
GOOGLopened 2020at $67.42 on 2 January 2020 and would close at $86.81 on 31 December, a 28% rise.
Growth continued into 2021, as the company reached anall-time high of $150.97on 19 November. Although the price dipped slightly in the following days, it would remainaround the $140 mark until the end of the year.
The stock pricestarted2022 at $145.05 and remained relatively steady for the first quarter. However, as macroeconomic headwinds hit tech companies, the stock began a downtrend that saw it close April at $114.11.
On 27 July 2022, the tech giant released its financial results for Q2 2022. Though the earnings missed estimates, they were better than many had feared and prompted a rebound inthe stock price,which jumped 7.6% the day the results were reported, from $105.02 on 26 July to $113.06.
However, the stock would soon hit adowntrend.On 21 September 2022 it dropped below $100 for the first time since early2021 and on 2 November it reached its lowest point of the year at $83.34.
So far, 2023 has seemed a lot more positive for GOOGL. The stock opened this year$89.59 and continuing with a slow but steady uptrend. On 23 January, the price edged over the $100 mark once again.
The price hit another downturn in February, amid rising competition in internet searches from artificial intelligence such as ChatGPT, falling to a low of $88.58 on 24 February.
However, the stock would rebound once again, rising above the $100 mark on 16 March, and continuing to trend above that level in the following months.
In May, GOOGL stock saw a significant upturn following the annual developer’s conference, I/O, in which the company announced plans to utilise many AI in much of its technology, including writing tools for gmail, and creating docs and spreadsheets.
The news was well received by GOOGL investors, many of whom had feared that the tech innovator was falling behind in the quickly evolving area of artificial intelligence, following the fellow tech company Microsoft (MSFT) $10bn investment in ChatGPT parent company Open AI.
As of 30 May, GOOGL was trading at $124.61.
Stock fundamental analysis: Q4financial results
In the most recent Q1 2023 earnings report Google CEO SundarPichai said:
“We are pleased with our business performance in the first quarter, with Search performing well and momentum in Cloud. We introduced important product updates anchored in deep computer science and AI. Our North Star is providing the most helpful answers for our users, and we see huge opportunities ahead, continuing our long track record of innovation.”
The first quarter of the year was a relatively solid one for Alphabet, with its consolidated revenue coming inat $69.8bn, growing 3% year-over-year (YOY). However, earnings per share (EPS) was at $1.17 falling from$1.23 the previous year.
Costs and expenses also increased 3.4%, from $29.6bn in Q1 2022 to $30.6bn. This was likely to be expected, as in 2022 the company said it would take a charge of between $1.9bnand $2.3bn, mostly in the first quarter of 2023, related to thelayoffsof 12,000 employees it announced in January. It also expected to incur costs of about $500 million related to reduced office space in Q1.
Meanwhile, on 21 April 2022, Alphabet announced that it would combineits DeepMind and Google Brain AI research units, ending a long-running internal rivalry between the London and Silicon Valley-based groups as it tries to make up lost ground in generative AI against Microsoft and OpenAI.
On 17 April, Alphabet lost about $55bnin market value aftera report from The New York Timessuggested thatcompetition was heating upin the mobile search market.
Google’s 2022 stock split
In its Q4 2021 earnings report, Alphabet announced its decision of a 20-for-1 stock split by way of a one-time special dividend on each share of the company’s Class A, Class B and Class C stock.
Stockholders recorded in the company’s books at the close of business on 1 July 2022 received 19 additional shares of the same class of stock that they already held by the close of 15 July 2022.
One major reason for companies to announce stock splits is to increase the number of its shares trading in the market. As Alphabet and Google CFO Ruth Porat commented:
“The reason for the split is to make our shares more accessible. We thought it made sense to do.”
The stock closed at $2,255.34 on 15 July2022 and opened at a split-adjusted price of $112.64 on 18 July.
Antitrust lawsuit
On 14 July 2022, Bloomberg reported that the US Department of Justice (DoJ) could file an antitrust lawsuit against Alphabet’s Google over its dominance of the online advertising market,citing sources familiar with the matter.
The division had been investigating Google’s practices in the advertising technology market for the past four years, and in 2020 sued the company over its search operations.On 9 September, attorneys for Alphabet and the DoJ began laying out their arguments in preliminary hearings.
On 23 January, the DoJ announced that it would sue Google for monopolising digital advertising technologies, stating:
“Today, the Justice Department, along with the Attorneys General of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia, filed a civil antitrust suit against Google for monopolising multiple digital advertising technology products in violation of Sections 1 and 2 of the Sherman Act.”
On 27 March, Alphabet filed a motionto dismiss the lawsuit, writing:
“In the more than three years that it has been investigating Google’s ad tech business, the United States has received more than two million documents from Google and taken over thirty depositions of Google witnesses. Yet plaintiffs remain unable to find support for their claimed antitrust harms.”
On 28 April, US federal judge Leonie Brinkema denied the motion to dismiss the lawsuit.
Google share price forecast: Analysts’ projections
As of 30 May, according to Coin Price Forecast,Alphabetprice could hit $155 by the end of 2023 and then might reach $163 by the end of 2024. Analysts estimate it couldrise to$219 within the year of 2025, and was anticipated to reach $252 in 2026, $302 in 2029 and $362 in 2033.
Morningstar senior equity analyst Ali Mogharabi gave GOOGL shares a fair value estimate of $154 on 8 May.
“We are maintaining our $154 fair value estimate for Alphabet following first-quarter results. We were impressed by:
- Google Search’s advertising revenue growth.
- Continuing strength in the cloud business, which is making headway toward profitability, likely next year.
- Consolidated margin expansion for the first time in three quarters.
- The latest authorized share buyback.
“Overall, we believe Alphabet is well positioned to benefit from an improving economic climate, which will accelerate ad spending. On the bottom line, while capital expenditure will not go down this year, the firm’s focus on efficiency should help expand margins beginning in 2024. We continue to view this wide-moat firm as undervalued.”
Based on data compiled by TipRanks, theaverage price target for Alphabet Class A was $130.57. This was based on 29 Wall Streets Analysts 12-month price targets, issued in the past threemonths. The highest analyst price target is $160.00, the lowest forecast is $115.00. The average price target represents 6.17% increase from the current price of $122.95.
Meanwhile, 38Wall Street analysts quoted by MarketBeatgave GOOGL a average stock price forecast of $130.51.According to the issued ratings of the analysts the consensus rating for Alphabet stock was ‘moderate buy’based on the current four hold rating and 34 buy ratings for GOOGL. The average twelve-month price prediction sawa high price target of $160.00 and a low price target of $113.00.
No analysts on TipRanks or MarketBeat gave the stock a ‘sell’ rating.
Many investment banks offered new price targets in their recent GOOGL stock forecasts, following the company’s financial results release.
Google stock predictions 2022 to 2025
Due to market fluctuations, the majority of analysts only set short-term price targets. Longer-term stock forecasts are available from algorithm-based forecasting services.
According to algorithm forecaster Gov Capital’sthelonger-term GOOGL stock forecast could see the price closing at $143.365in 2023 and $245.488in 2024. Its Google stock forecast for 2025 had the stock potentially closing at $362.888.
Another algorithm-based forecast platform, AI Pickup, predicted the company’s Class A shares could face volatilityin the next few years. Itsaidthe price could reach$133.14 in 2023, $137.52 in 2024 and $168.54 in 2025.The service saw Alphabet stock possibly reboundingto reach $192.8 in 2030, before falling to$143.14 in 2032 and106.38 by2033.
When looking for Google stock forecasts, it’s important to bear in mind that analysts’ forecasts and price targets can be wrong. Analysts’ Google stock projections are based on making fundamental and technical studies of the stock’s performance. Past performance is no guarantee of future results.
