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Ahead of Alphabet’s (NASDAQ:GOOGL) first quarter 2023 results on April 25, Credit Suisse analysts stated that advertising spend on Google most reflects the state of the overall economy.
The analysts, who have an Outperform rating and $136 price target on the stock, revealed the firm’s conversations with advertisers suggest that strength in certain verticals, such as travel, entertainment, and media, is offset by weakness in others, including auto, real estate, financials, and insurance.
In addition, they believe that “more near term, checks are pointing to an in line to slightly better result for Search in 1Q23 (est. remains unch’d at ~2.4% FXN, -1.3% reported).”
“We note that Performance Max went into general release in 4Q21, so we are starting to lap some of the benefits,” wrote analysts.
Furthermore, the firm said YouTube engagement “remains steady” despite the threat of TikTok.
“Feedback for YouTube remains soft given higher brand exposure,” analysts added. “As such, our current 2023 FXN growth projections for Search and Other stands at ~3.4% (2.3% reported) and YouTube at 4.0% (2.0% reported). We also update engagement/time spent data and the time series continues to suggest that YouTube has effectively triaged the potential challenge from the proliferation of TikTok.”
Credit Suisse maintained its Outperform rating on Alphabet based on ongoing monetization improvements in search through product/AI updates, a greater-than-expected revenue contribution from non-Search businesses, and optionality/shareholder value creation from new monetization initiatives.
