Alphabet (GOOGL) needs to ship more generative AI/GPU-enabled products to larger groups of users to show it can drive incremental engagement and more durable long-term monetization, Morgan Stanley said in a note to clients Wednesday.
"Shipping products and proving that they will indeed provide incremental multi-year revenue and cash flow growth remains the proof point that [Alphabet] needs to show in order to break out of this 16-20X PE multiple on our ~$10.40 of 2026 EPS," the investment firm said.
Morgan Stanley said it cut the company's 2026 EPS estimate by nearly 4% to $10.36 after its earnings report due to a 1% decrease in revenue and an about 11% increase in D&A.
The investment firm cut Alphabet's price target to $210 from $215, and kept its overweight rating.
Shares of Alphabet were down more than 8% in recent trading.
Price: 189.21, Change: -17.17, Percent Change: -8.32
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