Citi Sets New Alphabet Price Target Ahead of Earnings

Google CEO Sundar Pichai

The market continues to chug along on Tuesday morning with the S&P 500 up another 0.5% and the Nasdaq 100 tracked by the Invesco QQQ Trust (QQQ) in the green for the 10th straight day.

Small caps tracked by the iShares Russell 2000 ETF (IWM) continue to outperform, but it is the Roundhill Magnificent Seven ETF (MAGS) that is the star of the show with a move of nearly 2%.

Iran and Earnings in the Background

Investors are unconcerned about what is going on in Iran, and a mixed response to bank earnings isn't having much impact.

JPMorgan Chase (JPM) beat expectations with a 13% profit increase, but cut its net interest income guidance, and the stock is lower. Wells Fargo (WFC) missed and is down. Citigroup (C) posted its highest quarterly revenue in a decade and is holding up well. Oil is lower, and that is helping sentiment.

Adding to the positive tone on Tuesday morning, the March producer price index came in well below expectations, with headline PPI rising just 0.5% against forecasts of 1.1%, which reduces some inflation concern

My Positioning

I feel good about my positioning.

I am heavy in the biotechnology sector tracked by the iShares Biotechnology ETF (IBB) and that is performing well. I think this group can continue to run, especially as we start to see more deal news for small companies. I listed Alto Neurosciences (ANRO) as a name to watch on Monday and it has made a strong move to all-time highs.

Adding Alphabet

I'm looking to put more cash to work, and an easy way to do that is to ramp up my position in Alphabet (GOOGL) .

I own Meta Platforms (META) , Nvidia (NVDA) and Alphabet in the Magnificent Seven group, but I view Alphabet as the most likely to have the best run-up into its earnings report, due in about two weeks.

My experience with Google's AI tool Gemini makes me think it is underappreciated and likely a bigger driver than is currently anticipated. Citi appears to agree.

Citi raised its target on Alphabet on Tuesday to $405 from $390, stating that given its positive online advertising checks and Google Cloud demand momentum, it believes results are likely to beat expectations. According to TipRanks, the average target price is $385, with a low of $330 and a high of $450. With the stock currently at $327 and back above its 50-day simple moving average, it looks like it has the wind of momentum will continue to push it.

The Magnificent Seven is regaining its leadership role, and I expect that to continue as institutional investors park cash in these names in anticipation of strong earnings news. The easiest for folks to deal with the FOMO that has been building is to buy the MAGS.

I still have room to add to my Alphabet position, but am taking fairly large size there.

Small Caps

I will continue to look for good small-cap ideas but some of the speculative action has become a bit frothy and needs a rest. A pullback would be healthy at this point but I expect it to be shallow.

At the time of publication, DePorre was long GOOGL, NVDA, META and ANRO.