Alphabet stock slid for the third time in four days as investors continued to worry about how serious the damage from the YouTube problems will be. At least one analyst downgraded Alphabet stock earlier this week after reports of big brand advertisers pulling away from YouTube and Google Display Network because their ads were being placed with offensive videos, particularly content that promotes hate or terrorism.
However, not all analysts are worried, as the Google parent company may be too big for it to matter.
Alphabet stock price target still at $1,000
In a research note dated March 23, Morgan Stanley analyst Brian Nowak reiterated his Overweight rating and $1,000 price target on Alphabet stock. He noted that the headlines related to the fiasco are likely to weigh on the stock’s multiple, but he anticipates that the impact in dollars will be small. He pegs display ads at 10% of the company’s net revenues and adds that the business has “high advertiser diversification.”
Despite his skepticism that this is a serious problem for Google and YouTube, he does note that this is a real concern that the company will have to address, citing his conversations with advertisers and other participants in the industry. Google is making some efforts to fix the problem such as raising the bar on its ad policies. However, Nowak notes that today’s report that Verizon, AT&T, Johnson & Johnson, Enterprise and others have pulled back their spending with the company demonstrates that it isn’t doing enough.
A concern, but not yet
He added that this issue will be a key one to keep tabs on in the next few weeks because he does see the headlines and the possibility of more advertisers dropping out as a “likely tactical headwind” for Alphabet stock and its multiple. He noted that YouTube has successfully worked through problems like this in the past though.
Even though he sees the validity of the concerns, if the company does deal with them, he sees a…