Phillip Securities Upgrades Alphabet Stock to Buy Amid AI Momentum
Alphabet reported strong earnings on July 22, with cloud revenue growing 82% year-over-year and advertising up 14%. However, the stock fell over 7% due to concerns about free cash flow turning negative for the first time. On July 27, Phillip Securities analyst Serena Lim Yi Qi upgraded Alphabet from Accumulate to Buy while lowering her price target to $425 from $450. She cited strong AI momentum and a vertically integrated ecosystem as key positives. Lim argued that free cash flow negativity is temporary due to high capital expenditures for AI infrastructure—now projected at $195 billion to $205 billion in 2026—and not structural. The upgrade reflects confidence in Alphabet’s long-term growth potential, despite near-term margin pressures from supply chain constraints on hardware. Alphabet currently trades with a P/E of 16.04 and an exceptionally low PEG ratio of 0.14, suggesting it is undervalued relative to its expected earnings growth.
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Topics: AI growth Alphabet Capital expenditure Free cash flow Google stock