Alphabet (GOOGL), the parent company of Google, is in the midst of transitioning from search advertising revenue toward artificial intelligence, and this shift has prompted Wells Fargo to slightly lower its target outlook for the stock.
The bank maintained its overweight rating but reduced its price target on Alphabet (ASX: GOOGL) from $371 to $365. That target still implies roughly 30% upside compared with Friday's closing price.
Analyst Ken Gawrelski wrote in a Sunday research note that this hyperscale technology company is in a period of transition, with search advertising revenue weakening as the company shifts its focus toward building out artificial intelligence businesses.
He said in the report: "Although the product transition has driven a significant increase in user engagement and users are more willing to use the new products, the business model is not yet mature and cannot rely on higher cost per click (CPC) or entirely new advertising products to offset the pressure from declining paid clicks."
Alphabet released its earnings on Wednesday, with search advertising revenue falling short of expectations, and the stock has fallen 13.5% since then.
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