Alphabet Stock Rises Amid Positive Analyst Outlook

Alphabet's stock experienced a 2.8% increase on Friday morning following an optimistic price target adjustment by Raymond James analyst Aaron Kessler, who raised his target to $275 per share for the Google parent company. Kessler expressed increased confidence in Google's search revenue and adjusted his earnings forecasts for 2025 and 2026.

AI company Anthropic announced its plan to utilize over 1 million of Google's AI 'Tensor Processing Units' to provide more than one gigawatt of computing capacity for its Claude AI service. This announcement, made after Thursday's market close, is believed to have initiated the stock rally.

Kessler noted that even valuing Alphabet at 21.5 times its forecast 2027 earnings presents a 30% discount compared to AI leaders like Nvidia, Microsoft, and Oracle. He suggested that a more aggressive price target could see Alphabet shares valued at $350, representing a 34% increase from current levels.

However, with Alphabet currently priced at over 26 times earnings, most analysts predict its earnings growth will not exceed 15% annually over the next five years. Additionally, Alphabet's free cash flow appears weak as it invests heavily in AI ventures, generating less than $0.58 in cash profit for every dollar earned. This analysis suggests that Alphabet may not be a 'buy' based on its current valuation metrics.

These insights reflect diverse market perspectives and serve as valuable information for investors.