The analysis highlights Alphabet's resilience in the face of stock pressure following tariffs imposed by the US government. Despite potential slowdowns in digital advertising, the company is expected to perform better due to its efficient search business model. Attention is also drawn to Alphabet's cloud business, projected to see significant growth by 2025 as data center capacities increase. The fair value estimate remains at $237, suggesting the stock is undervalued, even amid expected challenges if advertising declines persist. The introduction of Gemini 2.5 is seen as a catalyst for future growth in cloud sales.
Alphabet is competitively well-positioned, even amidst economic uncertainty, leveraging its high-return search business to weather downturns in digital advertising spending.
Despite the current tumult, Alphabet's cloud business is expected to accelerate growth by 2025, coinciding with the relaxation of data center capacity constraints.
We maintain a $237 fair value estimate for Alphabet, viewing it as materially undervalued, especially under the pressure of potential digital advertising spending slowdowns.
The launch of Gemini 2.5 has generated significant developer interest, which Alphabet is poised to monetize through its cloud services in 2025.
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