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Google to Build Subsea Cable Linking the U.S. to Argentina

·2 min read

Alphabet's Google (GOOGL) plans to build a subsea cable connecting the East Coast of the U.S. to Argentina. The cable, named Firmina, will have additional connections in Brazil and Uruguay. It is part of Google’s effort to build a robust network and expand its global infrastructure.

Google plans to make Firmina the world’s longest subsea cable capable of being powered by a single source at one end if other power sources experience electricity interruption. This feature is expected to boost the reliability of connections through the cable.

“Achieving this record-breaking, highly-resilient design is accomplished by supplying the cable with a voltage 20% higher than with previous systems,” said Google in a blog post.

Google notes that people and businesses are depending more on digital services. The Firmina cable is expected to improve access to Google’s digital services in South America such as Gmail, YouTube, Search, and Google Cloud. (See Alphabet stock analysis on TipRanks)

Firmina will bring to 16 the number of Google’s subsea cable investments, which include Equiano, Grace Hopper, and Dunant, and consortium cables like Echo, JGA, INDIGO, and Havfrue.

Last month, Citigroup analyst Jason Bazinet downgraded Alphabet to Hold from Buy and maintained the price target of $2,415. This implies that the stock is fully valued at current price levels.

The analyst commented, “three things make us nervous: First, among the top 10 Internet ad firms, in absolute dollar terms, sell side expects ~2x the annual growth from ’21 to ’25 versus ’18 to ’20. Second, many investors believe ad intensity per dollar of economic activity is rising. We see little evidence of this. Third, even if the sell side estimates are right, growth will likely decelerate after 2Q21 (on tougher comps). Historically, that usually isn’t bullish for multiples.”

Consensus among analysts is a Strong Buy based on 27 Buys and 2 Holds. The Alphabet average analyst price target of $2,785.97 implies 15.70% upside potential to current levels.

GOOGL scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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