Google-owner Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) is set to report its second-quarter results on July 25. BofA Securities analysts previewed the quarter and expect a modest revenue beat and EPS upside on cost control and other income. The analysts raised their price target to $142 from $128, while maintaining a Buy rating. The new price target suggests more than 16% upside from yesterday’s closing price.
The firm estimates revenue and GAAP EPS of $60.7 billion and $1.42, respectively, versus the consensus of $60.4B and $1.34.
“We expect search & other growth to accelerate 210bps to 4% y/y (FX benefit), with our $42.3bn est above Street at $42.1bn,” they commented. “We expect 2Q core Google margins to be up 64bps y/y on cost savings/layoffs and expect GAAP EPS at $1.42, above Street at $1.34, with investment income (asset mark-ups) driving upside. Based on 3rd party data sources, we think investors are looking for in-line to 1% above Street revs., with extent (or lack of) of cost efficiencies a debate topic.”
Another aspect of discussion centers around the potential effects of integrating LLM (Language Model Models) into search results on revenues and costs. Despite this, BofA analysts hold a positive outlook on the steady growth of search share, which they believe will grant Google the ability to manage the pace of LLM integration effectively.
Overall, the analysts are anticipating 2Q cost-driven upside and potential Search acceleration in 2H due to macro improvements and new AI tools for advertisers. Alphabet is seen as a defensive, self-help stock in 2023 with stronger earning potential.