Alphabet's Dominance in Search and AI Drives Stock Potential, Pivotal Initiates Coverage

Alphabet's dominant position in search and AI drives stock potential - Pivotal By Investing.com

On Tuesday, Pivotal Research initiated coverage on Alphabet Inc. (NASDAQ:GOOGL) stock, issuing a 'Buy' rating with a price target of $215. The firm highlighted Alphabet's solid competitive positioning, underpinned by its dominant core search business, which holds approximately a 90% market share outside of China. The company's prospects are further bolstered by its potential to lead in consumer AI assistant use, given its widespread global device presence. Alphabet's prowess in artificial intelligence (AI) and its financial strength are seen as key drivers that could enable it to offer greater financial incentives to handset manufacturers for default AI placement. Additionally, Alphabet's #3 ranking in cloud computing is noted as having significant growth potential, considering the current low cloud market penetration in enterprise workloads, which is estimated at 15-20%. The research firm also underscored Alphabet's ownership of YouTube, the world's largest video and audio streaming platform, and Chrome, the leading browser with a 65% global market share excluding China. The ability of Alphabet to potentially lower costs, mainly by reducing its workforce of approximately 180,000 employees, was mentioned as a possible way to enhance its financial growth. This cost reduction could be partially offset by potentially higher Traffic Acquisition Costs (TAC) as the company seeks to extend its search dominance to AI. Regulatory and legal challenges were acknowledged as potential obstacles for Alphabet's ambitions in AI. Nevertheless, Pivotal Research maintains that the company is well-positioned to achieve strong financial growth and generate a reasonable AI return on invested capital (ROIC), even if the development of AI revenue-generating applications may take longer than anticipated. In other recent news, Google has been in the limelight due to several developments. The company was fined by Russian authorities for failing to remove content deemed illegal and not restricting access to prohibited information. The fines, totaling approximately $37,674.92 each, are part of Russia's ongoing efforts to regulate online content. Simultaneously, Google's trial over alleged monopolization of advertising technology markets is nearing its conclusion. Despite potential financial implications, experts suggest the impact would be relatively minor. Financial analysts from firms like Evercore ISI and Bernstein have provided insights into the case, highlighting the significance of advertising to Google's revenue. In another development, Epic Games announced plans to sue Google and Samsung (KS:005930) over alleged anti-competitive practices. The lawsuit centers around Samsung's security feature, Auto Blocker, which Epic claims obstructs competitors to the Google Play store and Samsung's Galaxy store. Meanwhile, former U.S. President Donald Trump, currently the Republican presidential nominee, has vowed to pursue legal action against Google if he wins the upcoming election. Trump accuses Google of bias, alleging it only shows negative stories about him. Lastly, Alphabet Inc., Google's parent company, has committed $3.3 billion to the construction of two new data center campuses in South Carolina. The investment is part of Alphabet's broader commitment to infrastructure to support the growing field of artificial intelligence applications. Alphabet's strong market position and growth potential, as highlighted by Pivotal Research, are further supported by real-time data from InvestingPro. The company's revenue growth of 13.38% over the last twelve months and a robust EBITDA growth of 34.59% underscore its financial strength. These figures align with the analyst's positive outlook on Alphabet's core businesses and AI potential. InvestingPro Tips reveal that Alphabet is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.49. This suggests that the stock may be undervalued considering its growth prospects, which could support Pivotal's bullish price target of $215. Additionally, Alphabet's strong cash position, with more cash than debt on its balance sheet, provides financial flexibility to invest in AI and cloud computing initiatives. For investors seeking a deeper understanding of Alphabet's financial health and growth prospects, InvestingPro offers 11 additional tips, providing a comprehensive analysis to inform investment decisions.

Pivotal starts Google, Meta stock coverage at Buy By Investing.com

Investing.com -- Pivotal Research Group initiated coverage of Google owner Alphabet (NASDAQ:GOOGL) with a Buy rating, highlighting the company's strong competitive position and potential for growth in cloud computing and AI. Google, which holds about 90% of the global search market share outside of China, is also recognized for its dominance in video/audio streaming through YouTube and its leading web browser, Chrome. Google's search business was deemed a monopoly in August, and the Department of Justice (DOJ) and a judge are considering remedies that could significantly impact the company's ability to leverage its market position. Despite this, Pivotal views the current valuation of Google as reflecting conservative post-2027 search revenue declines. Potential regulatory outcomes are not expected to be resolved soon, but Pivotal suggests that a Kamala Harris victory could lead to more favorable settlements for Google. In a separate note, Pivotal also initiated coverage of Meta Platforms (NASDAQ:META) with a Buy rating, setting a year-end 2025 target price of $780. Meta, known for its extensive portfolio of social media platforms including Facebook, WhatsApp, and Instagram, is praised for its management's ability to innovate and respond to competition. "Looking forward we see a strong revenue growth outlook from increased usage/new products/better targeting/higher prices boosted by cost efficiencies (enabled by AI) and eventually materially declining Reality Labs losses combined with what appears to be an attractive valuation at 24X '25 EPS," Pivotal analysts said in the note. The firm also acknowledges risks such as potential regulation and market dominance investigations, as well as the challenges posed by Google and Apple (NASDAQ:AAPL) in AI. Nevertheless, the investment firm believes that Meta's positives, including its aggressive management and attractive valuation, outweigh the potential negatives.