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 Google Youtube
Mizter_x94 / Pixabay

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 “low probability” that they will have any serious impact on the company’s near-term results. One reason is because advertisers that pulled their ad dollars are only doing it from YouTube and the Google Display Network and not from its other properties.

Further, he estimates that the affected businesses make up 21% of the company’s gross revenues, with YouTube at 12%, and 10% of net revenues. He said if 10% of Alphabet’s gross revenue disappears, it would only drain 1% of its net revenue. And finally, he feels that the company’s revenues are “diversified across millions of clients – with the top 100 ad spenders likely representing less than 20% of total ad revenue.”

Alphabet stock downgraded earlier this week

Nowak doesn’t feel that Alphabet stock is expensive at current levels, so he feels that investors should take advantage of any pullback in the shares in the next few days or weeks. However, not everyone is so upbeat on the outcome from these issues. On Monday, Pivotal Research analyst Brian Wieser downgraded Alphabet stock, moving to Hold from Buy. He also bumped his price target down a bit from $970 to $950 per share.

InvestorPlace noted that Alphabet stock fell below its short-term 20-day moving average and then after today’s drop, the shares fell below their 50-day moving average. This level has supported the stock twice since the middle of December, the website notes. The stock’s Relative Strength Index also tumbled to 38, although it hasn’t reached oversold levels yet. However, InvestorPlace warns that Alphabet stock may drop to the next support at around $810, but the 200-day moving average sits just under $800 a share.

The stock closed down 1.19% at $839.65 on Thursday.