Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) first-quarter results came in substantially below estimates. However, Wall Street analysts remain bullish on GOOG stock’s long-term prospects.
During the first quarter, the company’s revenue fell far below analyst expectations as it confronted inflation, supply chain issues and fallout from Russia’s invasion of Ukraine. The company said it made a quarterly profit of $24.62 per share, roughly 4.63% below expectations.
The lackluster results were mainly due to a substantial miss on YouTube. The platform’s revenue increased just 14% to $6.9 billion, below an expected $7.5 billion. The weakness was partially due to competition from ByteDance’s TikTok and the impact of higher inflation rates on advertisers.
Alphabet mainly generates sales from advertising, and YouTube is a major part of the equation. Nevertheless, Wall Street analysts feel these short-term roadblocks won’t impact the company’s long-term performance. For instance, Raymond James analyst Aaron Kessler is optimistic about the future of GOOG stock.
According to CNBC, Kessler noted the following in his analysis:
“First, Alphabet’s management explained that the issue with YouTube was the direct response ad type, which faced a tough comparison with the same quarter the previous year. However, the company believes that there is still a great opportunity in the direct response category.”
Furthermore, he also discussed the long-term potential of Google Search, despite the impact of Russia’s invasion of Ukraine. Additionally, Kessler believes a recovery in retail and international travel is likely to benefit the business at a rapid clip. Finally, Alphabet’s cloud business has seen a lot of gains and could evolve into a major growth catalyst.
Kessler rates the stock a buy with a target of $3,180. Analysts at Refinitiv also have a similar target at $3,169, representing a substantial upside from current levels. If you believe the analysts, it may be time to consider picking up some shares of GOOG stock.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
