In the latest analysis by Wedbush Securities, Alphabet Inc. ($GOOGL) is projected to deliver robust results for the second quarter of 2024, driven predominantly by sustained strength in its Google search operations. The insights gathered from a survey involving 200 advertisers based in the United States reveal an encouraging trend, with a significant 39% of respondents reporting an annual spending increase of at least 10% on Google search during the June quarter.
This is a marked improvement when compared to the previous assessments made by Wedbush. Wedbush now anticipates Alphabet’s revenue from the Google search sector to grow approximately 13% in the upcoming quarter, revising its earlier estimate of a 12% rise. The brokerage's revenue prediction of $48.1 billion from Google search exceeds the consensus by 1%.
Furthermore, the consolidated revenue growth forecast stands at 13.1%, surpassing the consensus expectation of 12.8%. Adjusted Earnings Per Share (EPS) is expected to reflect a notable 22% annual increase, reaching $2.21, as indicated by the assessment from Wedbush. Alphabet is expected to unveil its latest financial figures after market closing on Tuesday, a moment that many investors and analysts are analyzing closely.
"We believe that the setup remains quite favorable as we approach the second-quarter results, given our advertising survey and agency insights pointing towards persistent strength in Google Search," stated analysts led by Scott Devitt in their client note. "While we anticipate a more modest sequential deceleration in search growth, our conviction regarding full-year spending intent has seen a significant uptick." Across the board, Alphabet continues to maintain a disciplined approach to cost management to bolster its investments in AI technology.
According to Wedbush, this careful cost control is projected to enhance Alphabet's quarterly operating margin by an impressive 246 basis points, pushing it to 31.7%. Moreover, Wednesday’s report indicates that growth in Google Cloud has accelerated by 278 basis points in the last quarter, as the segment capitalizes on AI monetization while mitigating previous headwinds associated with cost optimization and easing comparative metrics from prior periods.
"We are confident that Google Cloud is well positioned for both the second quarter and the latter half of 2024, as the primary pressures from cost optimization seem to have waned within the industry, allowing AI monetization to propel incremental growth," Devitt noted. Wedbush also emphasized that expectations for short-term capital expenditures have now adjusted to align more closely with market realities.
Estimates for the full year have surged approximately 33% since the onset of 2024. The likelihood of a negative surprise linked to spending in the second quarter is regarded as relatively low; however, it remains a cautionary factor for the company moving forward. The brokerage firm has reiterated its outperform rating on Alphabet’s stock, with a 12-month price target set at $205, suggesting optimism surrounding the company’s growth trajectory despite the inherent risks in the market. Current Market Price: $182.56, Change: +$3.17, Percentage Change: +1.77..