Alphabet Stock Price Forecast July 2021 – Time to Buy Google Stock?
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With a year-to-date gain of 58%, Alphabet (GOOG) is the best performing FAANG stock in 2021 by a wide margin. Facebook is a distant second with 37% returns while both Apple and Amazon are up around 13% each.
Netflix is the only FAANG stock that is in the red so far in 2021 amid concerns over slowing growth and rising competition in the streaming industry. What’s the forecast for Alphabet stock in July 2021 after the outperformance? Is it still a good buy?
GOOG stock technical analysis
Alphabet stock is looking bullish on the charts and is in an uptrend. It trades above the 30-day, 50-day, 100-day, and 200-day SMA. The 12,26 MACD (moving average convergence divergence) also gives a buy stocks signal. However, the stock has a 14-day RSI (relative strength index) of 67 which is getting near overbought levels. RSI values above 70 signal overbought levels.
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Alphabet stock recent developments
Alphabet released its second-quarter earnings yesterday after the close of US markets. It posted revenues of $61.88 in the quarter which surpassed estimates of $56.16 billion. The steep rise in revenues was led by a 69% rise in adverting revenues. The company’s advertising revenues took a beating in 2020 amid the COVID-19 pandemic. However, revenues have since bounced back.
Alphabet’s EPS of $27.26 was also way ahead of the $19.34 that analysts were expecting. Meanwhile, despite the massive earnings beat, the stock was relatively muted and was up less than 1% in pre-market price action today. Apple stock was also trading lower. While the company shattered earnings estimates, the management sounded cautious on the outlook amid the global chip shortage.
GOOG earnings beat estimates
Alphabet management sounded upbeat on the performance in the quarter. “Total revenues of $55.3 billion in the first quarter reflect elevated consumer activity online and broad based growth in advertiser revenue. We’re very pleased with the ongoing momentum in Google Cloud, with revenues of $4.0 billion in the quarter reflecting strength and opportunity in both GCP and Workspace,” said Alphabet CFO Ruth Porat.
Alphabet stock forecast
Meanwhile, Wall Street analysts are bullish on Alphabet stock and of the 44 analysts polled by CNN Business, 43 rate GOOG stock as a buy while one rated it as a hold. None of the analysts have a sell rating on the tech giant. However, GOOG’s median target price of $2,813 implies an upside of only 2.8% over the next 12 months. Analysts’ target prices can tend to lag the price action and we could see them upwardly revise the stock’s target price after the massive second-quarter earnings beat.
The highest target price for GOOG stock is $3,350 which implies an upside potential of 22.4%. The stock’s lowest target price of $2,500 implies an 8.6% downside from the current levels.
Credit Suisse on Alphabet stock
Earlier this month, Credit Suisse had raised its target price on Alphabet stock to a street high of $3,350. “Given Google’s global footprint, it is worth noting that nearly all advertising sectors are on pace to exceed our expectations for 2Q21. And while overall ad budget recovery propelled recent results, we shift focus to the more important product-driven contributors to ad volume/pricing growth for 2H21 and beyond,” said Credit Suisse analyst Stephen Ju.
The note added, “We maintain our Outperform rating based on the following: 1) ongoing monetization improvements in Search advertising through product/AI driven updates, 2) greater-than-expected revenue contribution from non-Search businesses (YouTube, Cloud, and Play).”
GOOG stock long term forecast
The long-term forecast for GOOG stock looks positive. The company has a massive lead and network effect in the advertising business. The Alphabet ecosystem is impeccable and it is tough to recreate for others. Looking at the digital transformation, companies like Alphabet could be winners in the long term. Analysts expect the company’s revenues to rise 29.6% in 2021 and 16.3% in 2022. The stock has several long-term growth drivers including YouTube and cloud which will add long-term value.
Alphabet and antitrust concerns
Meanwhile, US tech giants including Alphabet are battling antitrust concerns in several jurisdictions including the UK. The massive fees that Alphabet and Apple charge in the app stores is also a matter of concern for developers and Epic Games has filed a lawsuit against the companies after its Fortnite was booted out of the app stores.
GOOG stock valuation
GOOG stock trades at an NTM (next-12 months) PE multiple of 31.6x. The multiples have averaged 27x and 26x respectively over the last three- and five-year period respectively. The stock’s valuation multiples have expanded amid the digital transformation. However, the valuations don’t look too stretched and the earnings growth justifies the rerating.
Alphabet stock was trading almost 1% higher in US premarket trading while Nasdaq futures are almost flat for the day. GOOG stock has a 52-week trading range of $1,406.55-$2800.22. The stock made its 52-week high yesterday only and looks set to hit a new record high in today’s price action.
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