On Monday, Evercore ISI made strategic calls ahead of earnings announcements, focusing on the performance of specific stocks. The firm predicts that Molson Coors (NYSE:) Beverage Company (NYSE:TAP) will outperform competitors Expedia Group Inc. (NASDAQ:) and Alphabet Inc. (NASDAQ:), while anticipating an underperformance for Airbnb Inc. (NASDAQ:ABNB).
For Expedia, Evercore’s outlook is positive, similar to their perspective in the second quarter. Despite a rise in the stock since then, the firm notes a turnaround in VRBO, which accounts for approximately 20% of total bookings. U.S. app download data from SensorTower indicates a year-over-year growth of 7% in the third quarter of 2024, compared to 2% in the second quarter and a decline of 21% in the first quarter. Evercore believes that the positive trend could help narrow the valuation gap between Expedia and its peers, Airbnb and Booking Holdings Inc. (NASDAQ:), as Expedia currently trades at a lower price-to-earnings multiple.
Alphabet’s stock has seen underperformance intra-quarter, with modest expectations from Wall Street for its third-quarter revenue in areas such as Search, YouTube, and Cloud services. However, positive intra-quarter advertising channel checks suggest potential upside for Alphabet’s stock, which is currently valued near what Evercore considers a trough multiple.
On the other hand, Evercore is less optimistic about Airbnb, citing the company’s premium valuation and potential risks to third-quarter bookings and revenue estimates. Factors such as new short-term rental regulations in Hawaii and the need for significant marketing and product investments to achieve double-digit top-line growth are seen as potential drags on the company’s performance. This is despite market expectations for Airbnb’s EBITDA margin to improve modestly in 2025.
In other recent news, Alphabet Inc.’s Google has signed a groundbreaking deal with Kairos Power to secure electricity from small modular reactors (SMRs) for the first time. The agreement is expected to bring Kairos’ inaugural SMR online by 2030, with additional reactors operational by 2035. This development follows the trend of tech companies, including Amazon (NASDAQ:) and Microsoft (NASDAQ:), turning to nuclear power to meet their growing energy needs.
On the financial front, Goldman Sachs adjusted its outlook on Alphabet, reducing the company’s price target while maintaining a Buy rating. The investment firm’s analysis took into account the potential financial impact of ongoing U.S. Department of Justice (DOJ) antitrust lawsuits and the evolving landscape of search technology influenced by advancements in AI.
In the realm of artificial intelligence, Google’s dominance was underscored by recent Nobel prizes awarded to its experts. Demis Hassabis, co-founder of Google’s AI unit DeepMind, and colleague John Jumper were honored for their work on protein structures, while former Google researcher Geoffrey Hinton received a Nobel prize for contributions to machine learning.
Google is also navigating significant legal challenges, with mandates to open its Play Store to competition and potential antitrust actions from the DOJ. The company has been ordered to allow Android users to access and download competing app platforms and use alternative in-app payment systems.
In addition, the DOJ has proposed potential remedies aimed at dismantling Google’s search dominance, suggesting the divestiture of certain business segments, such as its Chrome browser and Android operating system.
InvestingPro Insights
To complement Evercore ISI’s analysis on Alphabet Inc. (NASDAQ:GOOGL), InvestingPro data offers additional insights into the company’s financial position. Alphabet’s market capitalization stands at an impressive $2.05 trillion, reflecting its dominant position in the tech industry. The company’s P/E ratio of 23.45 suggests a reasonable valuation considering its growth prospects.
InvestingPro Tips highlight Alphabet’s strong financial health, noting that it “holds more cash than debt on its balance sheet” and “cash flows can sufficiently cover interest payments.” These factors support the company’s ability to invest in growth initiatives and weather potential economic headwinds.
Furthermore, Alphabet’s revenue growth of 13.38% over the last twelve months aligns with Evercore’s positive outlook on the company’s advertising channel checks. This growth, coupled with a high gross profit margin of 57.64%, underscores Alphabet’s operational efficiency and market strength.
For investors seeking a deeper understanding of Alphabet’s financial metrics and growth potential, InvestingPro offers 11 additional tips, providing a comprehensive view of the company’s investment profile.
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