Alphabet received another downgrade on Tuesday, making Bernstein the latest Wall Street company to pull out of Google’s parent company.
Shares fell 1.5% after market performance was cut from outperformance. The stock has fallen six times out of seven, but is still up more than 30% so far this year. Analyst Mark Shumlik wrote that the stock story “rapidly caught up with the fundamentals,” resulting in a balanced risk profile.
The company also cited risks associated with artificial intelligence, an emerging technology in which Alphabet is seen as a major player and which has fueled the 2023 rally for large-cap stocks such as Microsoft and Nvidia.
Alphabet warned that “AI development went from too slow to too fast,” and that “aggressive push to integrate GenAI into core search results could create short-term air pockets in search ad pricing.” There is,” Bernstein wrote.
The downgrade brings Alphabet’s consensus rating, which measures the ratio of buy, hold, and sell ratings, to 4.655 out of 5, the lowest for the stock since April 2018. A year ago the consensus was 4.961 out of 5.
UBS on Monday downgraded Alphabet’s rating to neutral, saying AI-related revenue “could take time to optimize” and “finding an upside to current high-single-digit site growth projections is unlikely.” “It’s difficult and the consensus calls for an acceleration to 11%.” “
Alphabet is not the only megacap that appears to have softened sentiment. Apple’s consensus rating is the lowest since November 2020, and Microsoft’s rating is at its highest level since mid-2019.
Still, Wall Street remains overwhelmingly bullish on Alphabet, with about 85% of analysts still recommending buying the stock. Bernstein was also positive, writing that the stock “like a warm embrace” and “hopefully come back soon.”
