Google stock just got a rare downgrade

By:
on May 15, 2023
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  • Loop Capital analyst downgraded Alphabet Inc to "hold" on Monday.
  • Rob Sanderson explained why he turned dovish in a research note today.
  • Google stock is currently up close to 30% versus the start of the year.

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Alphabet Inc (NASDAQ: GOOGL) has done fairly well since the start of this year but a Loop Capital analyst recommends that investor move with caution from here on out.

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AI mania could be a headwind for Google stock

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Rob Sanderson downgraded the tech stock to “hold” this morning as he doesn’t see it a given that Google will maintain its dominance through the ongoing craze around artificial intelligence.

It’s noteworthy that the multinational made a series of AI focused announcements last week. Still, the analyst said in his research note:

We consider search competition from Microsoft a lesser threat than risk of displacement from behavioural change as users interact more with AI assistants to find information.

His $125 price objective on Google stock still represents about a 7.0% upside from here, though.

Google should focus more on cutting costs

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Earlier this year, the tech behemoth announced plans of lowering its headcount by a whopping 12,000 to cut costs.

But Sanderson sees a need for more considering its expense per employee is still the highest among the big four tech companies. On the AI front, the analyst also said:

We disagree with management’s characterization that AI proliferation is similar to transition to mobile. Long-term structural uncertainties surrounding AI will keep investors nervous as landscape evolves and put a ceiling on valuation.

Nonetheless, Alphabet reported market-beating results for its first financial quarter last month as Invezz reported here. Versus the start of 2023, Google stock is up close to 30% at writing.  

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