Alphabet Stock 'Should Trade At A Premium': 5 Analysts Highlight AI, CapEx, How Much YouTube Could Be Worth

Core Viewpoint - Analysts express mixed sentiments regarding Alphabet Inc's latest CapEx estimates and the valuation of YouTube following a mixed fourth-quarter report, with some maintaining positive ratings while adjusting price targets downwards [1][2][7]. Group 1: Analyst Ratings and Price Targets - Morgan Stanley analyst Brian Nowak maintained an Overweight rating and lowered the price target from $215 to $210 [1]. - Needham analyst Laura Martin maintained a Buy rating with a price target of $225 [1]. - JPMorgan analyst Doug Anmuth maintained an Overweight rating and lowered the price target from $232 to $220 [2]. - BofA Securities analyst Justin Post reiterated a Buy rating with a $225 price target [2]. - Goldman Sachs analyst Eric Sheridan reiterated a Buy rating and raised the price target from $215 to $220 [2]. Group 2: Company Performance and Insights - Google Search and YouTube were highlighted as strong performers in the quarterly results, with YouTube's advertising revenue up 14% year-over-year [5][8]. - CapEx guidance for 2025 is set at $75 billion, representing a 43% year-over-year increase and 25% above Martin's estimate of $60 billion [4]. - Analysts express concerns that higher spending on GenAI may lead to uncertainties regarding return on invested capital (ROIC) until more products are shipped [3][7]. Group 3: Valuation Insights - Martin estimates YouTube's worth at $666 billion, or approximately $54 per share, based on a sum-of-the-parts valuation [6]. - The valuation is derived from comparing advertising and subscription revenues to those of streaming company Netflix [6]. - Analysts believe Alphabet may be worth more in parts than as a whole, with some welcoming regulatory efforts to break up the company [6]. Group 4: Future Outlook and Market Position - Analysts see Alphabet's long-term position as strong due to its dominance in digital advertising, YouTube's strength, and advancements in GenAI [7][11]. - There are concerns about whether Google can maintain margins in 2025 amid slower revenue growth and increasing depreciation [9]. - Analysts remain optimistic about the potential benefits of AI innovations for advertising and cloud demand, despite near-term pressures from higher spending [10][12].