Alphabet has 'limited' near-term catalysts, KeyBanc says as Q4 results on deck
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Alphabet (GOOG, GOOGL) is set to report fourth-quarter earnings after the close of trading and KeyBanc acknowledges that near-term catalysts are "limited," but longer-term, there are a lot of positive opportunities to generate additional revenue and the companies large amount of cash creates an opportunity for stock buybacks.
Analyst Justin Patterson, who has an overweight rating and a $3,090 price target, said he expects revenue to be $59.2 billion, aided by advertising and Google Cloud, which should help it beat Wall Street expectations. He expects the company to earn $25.37 per share, which could be hurt by additional hiring and marketing campaigns.
"Search is poised to grow [more than] 40% [year-over-year] in 2021E, representing an abnormally high nominal revenue dollar increase," Patterson wrote in a note to clients. "We struggle to see Search achieving [more than] 10% [year-over-year] growth against that [comparison]."
Alphabet (GOOG, GOOGL) shares were higher in pre-market trading, at $2,723.85, up slightly more than 0.6%. 
In addition, the analyst said that a competitive labor market is causing wage inflation and coupled with moderating revenue growth and costs, such as travel, starting to return to normal, operating margins could be slightly lower than Wall Street thinks, at 34.5%, compared to estimates of 35.4%. 
Other key areas to watch are spending on initiatives on artificial intelligence, video, cloud and immersive environments, as well as how the company allocates its capital, with the potential for buybacks, given the company had $142 billion in cash at the end of last quarter.
Last month, Google (GOOG, GOOGL) said it was pushing to dismiss an antitrust lawsuit brought upon by several states, including Texas, that charged the search-engine giant with abusing dominance in online advertising.