It's these factors that allowed the company to quickly build out a now rapidly growing cloud offering and investment in its industry-leading autonomous vehicle service Waymo. The other broad factor that has always been a part of our investment thesis is the simple fact that Alphabet has the balance sheet, cash flow profile and artificial intelligence know-how to penetrate new growth opportunities over time. Both Apple and Meta are also Club holdings. Given that users go directly to Google via their browser of choice to conduct a search, the platform has largely escaped the Apple (AAPL) app tracking privacy headwind hurting other ad platforms, including the other major player in the space, Meta Platforms (META). Our thesis is predicated on several factors, the most important being Alphabet's dominant search position, which allows it to provide its advertising customers with the best ad dollars return on investment (ROI) in the world. To better illustrate this train of thought let's consider our investment thesis in Alphabet and the dynamics behind this UBS price target cut.

Of course, if you are a long-term investor then you should expect to experience difficult years and periods of dismal market sentiment, neither of which really tell you anything about the business you own beyond that short time horizon. As a result, near-term estimates and sentiment - which is reflected via the multiple - essentially drive the entire number. The most popular means of developing a near-term outlook, typically about one year out, first assumes a valuation multiple and then multiplies it by an earnings estimate. Before we go any further, let's run through a quick refresher on how most analysts develop a price target. Maybe you're wondering: How can the price target can be slashed so much but remain a stock that UBS recommends buying? Part of the answer reflects Alphabet's more than 20% decline year to date, as well as the fact that the price target of $2,650 from UBS was 20% higher than Wednesday's close. But at the same time, they reiterated their buy rating on the stock. In a note to clients, analysts at UBS cut their price target on shares of the Google-parent significantly to $2,650 from $3,600. That's why we want to provide Club members with some thoughts on Thursday's big reduction in how one such firm is valuing Alphabet (GOOGL) and explain why we don't put much into the cut. Longer-term investors should always take changes in stock price targets from Wall Street research outfits with a grain of salt, especially when the factors driving the adjustments are external to companies' core businesses.

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