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An analyst from BNP Paribas Exane slashed the rating on Alphabet (NASDAQ:GOOGL) to Neutral from Outperform with a $118 per share price target.
The analyst moved to the sidelines as the latest data points toward weakening advertising trends. As a result, he slashed Q2 advertising revenue estimates by 3% as “our TRACKER turns incrementally negative under a tougher macroeconomic backdrop with high inflation”.
The new cuts push Exane below Q2 consensus estimates for ad revenue by about 4%.
In addition to macro headwinds, the analyst also sees several other headwinds facing Google, such as lower app store fees, FX headwinds, as well as opening up of in-app payment systems. He also highlights senior departures and regulatory headwinds.
“YouTube is seeing higher competition in short video with TikTok alongside Apple (NASDAQ:AAPL) iOS privacy headwinds. Alphabet has long term structural growth with strong technology moats, but Alphabet now needs to navigate several challenges,” he explained in a client note.
“We prefer Microsoft’s enterprise exposure and communications,” the analyst concluded.
Alphabet is due to report Q2 results on July 26 after market close.
GOOGL shares are down 0.2% in premarket Wednesday.
