Key insights
- Mizuho raised its price target on Alphabet (GOOGL) to $420 based on a bullish outlook for Google Cloud revenue growth, driven by the Anthropic partnership and backlog analysis. The firm projects significant incremental operating income and EPS gains by 2027. While InvestingPro's Fair Value analysis suggests potential overvaluation, Mizuho sees upside from multiple expansion as cloud becomes a larger part of the earnings mix, increasing exposure to AI infrastructure.
Investing.com - Mizuho raised its price target on Alphabet Inc. (NASDAQ:GOOGL) to $420 from $410 on Thursday while maintaining an Outperform rating on the shares. The stock currently trades at a P/E ratio of 29.5 with a PEG ratio of 0.85, suggesting attractive valuation relative to growth prospects.
The firm increased its Google Cloud revenue estimates based on signals around the Anthropic partnership and a refined backlog analysis. Mizuho projects Cloud revenue could reach $149 billion in 2027 in its bull case versus Bloomberg consensus of $116 billion. The company’s overall revenue grew 15% over the last twelve months, reaching $403 billion, with the $3.84 trillion tech giant demonstrating strong momentum.
The firm estimates incremental margins of approximately 55% could generate roughly $18 billion of incremental operating income in 2027. That translates to about $1.23 of incremental earnings per share after taxes, which at a 35x price-to-earnings ratio implies $43 per share of upside, or 14%.
Mizuho raised its 2026 earnings per share estimate to $11.81 from Street consensus of $11.62 and its 2027 estimate to $14.04 from $13.56. The analyst commented that "Street numbers underwrite too little revenue upside and margin power" especially if TPU sales translate into asset-light royalty-like economics. An InvestingPro tip notes the company is trading at a low P/E ratio relative to near-term earnings growth, though current Fair Value analysis suggests the stock may be overvalued at present levels. For deeper insights, investors can access Alphabet’s comprehensive Pro Research Report, one of 1,400+ available on InvestingPro.
The firm sees potential for multiple expansion as cloud becomes a larger portion of the operating income mix, expanding the company’s exposure to AI infrastructure. Mizuho noted upside to the overall valuation as cloud grows within the earnings mix.
In other recent news, Google announced the release of its Gemma 4 open-source artificial intelligence models under an Apache 2.0 license. These models have been downloaded over 400 million times since the first generation’s launch, with more than 100,000 variants created. Additionally, Google has introduced a new chat import feature for its Gemini AI assistant, allowing users to upload chat history from other AI apps. Meanwhile, Google’s Waymo unit has launched a fully autonomous ride-hailing service in Nashville, covering a 60-square-mile area, with plans to integrate with the Lyft app by 2026. Google also made Device Bound Session Credentials available for Windows users on Chrome 146, aiming to combat session theft by malware. Furthermore, Needham released a report using data from Anthropic, highlighting the impact of generative AI on the labor market across 22 industries. The report notes a gap between theoretical predictions and actual adoption of AI in the workforce, with varying levels of implementation across different sectors. These developments reflect Google’s ongoing advancements in AI technology and services.
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