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. 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. 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. But at the same time, they reiterated their buy rating on the stock. 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. Before we go any further, let’s run through a quick refresher on how most analysts develop a price target. 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. As a result, near-term estimates and sentiment — which is reflected via the multiple — essentially drive the entire number. 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. To better illustrate this train of thought let’s consider our investment thesis in Alphabet and the dynamics behind this UBS price target cut. 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. 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). Both Apple and Meta are also Club holdings. 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. 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. Then, of course, there’s YouTube, where the company spends no money on content yet provides revenue that rival that of streaming leader Netflix . The list goes on, but at the heart of it all is a strong financial position, AI, and a better understanding of its user base than nearly any other company in history. With that in mind, lets take a look at why the UBS analysts cut their price target on Alphabet. If the factors behind move in some way speak to our longer-term thesis, then that may be a reason to reconsider the position. If, however, the reduction is due to external factors and has little to do with the company itself, then weakness on a cut such as this may be exactly what investors should be looking for to load up on a name they believe in at a lower stock price. The Club portfolio has a 1 rating on Alphabet, which mean we view it as a buy at current levels. For starters, this cut came as a part of a broader industry note in which the UBS analysts cut estimates across their U.S. online advertising coverage universe. That alone tells us that their negative near-term outlook is at least partially based on the industry factors resulting from the macroeconomic slowdown we are seeing. The analysts write: “We see Google as the best insulated fundamentally, though not without risk to both numbers and the multiple,” adding “we see Alphabet relatively well positioned this year given it’s skew to performance advertising, insulation from privacy headwinds, a continuing travel ad recovery and the scaling of Performance Max.” While the analysts do cite YouTube margins, the need to invest aggressively to close the gap in cloud, and other social media players closing the ad spend ROI gap over time, the UBS note ultimately does not call out much in terms of deteriorating fundamentals that in any way impact our longer-term view of the company’s growth and earnings potential. Another thing to keep in mind is that advertising platform dominance is more about relative ROI than absolute ROI. Companies are going to advertise, the question is where will they get the best return? So, if a headwind like Apple’s privacy updates, or Europe’s General Data Protection Regulation before that, impacts the entire industry, the only thing that matters is, which company can best adapt. That tends to be the companies with the most scale and resources to invest in updates. In the end, we come away from the UBS note seeing little evidence of impairment to our longer-term thesis and are of the view that the price target cut is more a result of analysts updating their models for factors the market has to a large extent already priced in, given we are below their updated target. Long-term investors need to be mindful that just like estimates and multiples will come down when the economy slows, the resilient companies that can navigate the tough times, will ultimately see estimates move back up and multiples expand as the backdrop improves. These are the type of companies we’ve been striving to own since the beginning of the year; those that make stuff and do things for a profit and generally trade at reasonable multiples. Rather than act on analyst updates like the one from UBS, which are more useful for shorter investment horizons, an investor in it for the long haul can use them to their advantage by focusing on whether they are the result of external dynamics — in this case a slowing macroeconomic backdrop — or due to company specific issues. If the answer is the former, then Wall Street’s negative reaction to research may provide an opportunity. If it’s the latter, however, an objective review of the position is warranted. In this case, we believe it is clearly the former and remain positive on the longer-term upside on shares of Alphabet. (Jim Cramer’s Charitable Trust is long GOOGL, AAPL and META. See here for a full list of the stocks.) 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