UBS downgrades Alphabet stock, sees better risk-reward in Meta and Amazon

UBS analysts downgraded Alphabet (NASDAQ:) shares to Neutral from Buy with the new price target of $132 per share (up from the prior $123).

The analysts highlight 4 key reasons why he is moving to the sidelines:

1. Limited upside to current high-single-digit Sites growth estimates;
2. Medium-term revenue risk;
3. Operating income margin expansion could be offset by GenAI investments; and
4. Better risk-reward in other stocks, namely Meta Platforms (NASDAQ:) and Amazon (NASDAQ:).

On the competition front, the analysts still don’t see Bing or ChatGPT as “major threats” given the superiority of Search.

“We see some tail risk that Meta’s AI chat could gain traction given the scale of users across its apps but we view this as more speculative. Our original concerns around the cost of GenAI have moderated, though near-term risk remains and the co did increase capex guidance last quarter and flagged a mix skew towards (faster depreciating) technical infrastructure. As such, while we view both the cost and competitive risks as less severe, some element of these risks remain,” they said in a note.

Alphabet shares are down over 1.5% in premarket Monday.