Alphabet stock has earned a big downgrade due to the threat Google now faces from Amazon in the digital ad space. BMO Capital Markets analyst Daniel Salmon cut his rating on the search giant to Market Perform as he feels that a market that was once shared by only two parties (Google and Facebook) is now being split among three, with Amazon being the third.
Also today in a separate report, he boosted his price target for Amazon stock to an ultra-bullish $1,200 per share.
Still prefer Alphabet stock over Facebook
The analyst predicts that Amazon’s ad business is picking up strong momentum and that it will be Google’s biggest “competitive headwind” since Facebook. Interestingly, he still prefers Alphabet stock over Amazon stock because Google offers some new ad load growth, such as its fourth mobile search unit and also the Promoted Places ads on Maps.
He also likes the improvements to ad targeting on YouTube, including the use of search data, and he believes that most investors still “significantly” underappreciate this factor and how it affects Alphabet stock.
Update on YouTube protests
He also updated his view on the protest by YouTube advertisers, saying that based on his conversations with contacts in the industry, he expects those protests to start ending over the next several weeks. Advertisers were upset that their ads have appeared alongside or within potentially offensive content. As such, he predicts that the impact will be in the “low hundred millions.”
However, he added that this figure doesn’t include two big cross-currents, one of which is that some advertisers have boosted their spending to take advantage of the “depression” in the YouTube market. He reported that one brand that was said to be cutting spending in one region was raising it in another. He also reported that some brands that face off with some of the bigger brands that have been protesting have stepped into the vacancies to boost their “share of voice.”
Additionally, Salmon said there’s been an “immeasurable amount of lost negotiating leverage in the Upfront season.” He believes strongly that much of the public commentary is mostly “public positioning for upfront negotiations.”
Shares of Alphabet stock slipped by as much as 0.56% to $851.92 during regular trading hours on Tuesday.