BMO Capital Markets analysts have revised their price target for Alphabet (NASDAQ: GOOGL) stock upward from $215 to $222, reflecting increased optimism about the tech giant’s Search and YouTube businesses, bolstered by effective AI capabilities.
Over the past year, Alphabet’s Search market share has grown by 130 basis points in the U.S. and 310 basis points globally, driven by the proliferation of chatbots in apps, which encourage repeat query behavior among users.
“We are revising our 2Q24 Search estimate to +13.5% year-over-year from 13%, supported by robust performance across verticals and favorable channel checks,” noted analysts in a recent report.
Regarding YouTube, analysts anticipate a 20-40 basis points increase in 2024 Net Revenue estimates, assuming a reduction of 15-30% in ad spend on TikTok. A significant reduction of 50% in TikTok ad spend could potentially boost YouTube revenue by 60 basis points, with a complete cessation providing a 90 basis points increase relative to current forecasts.
Furthermore, YouTube’s growth is enhanced by Google’s AI tools, including features like direct video uploads from Studio mobile, expanded YouTube Create availability in 21 countries, and AI-driven monetization tools for creators, fostering increased time spent and market share gains in U.S. Connected TV (CTV).
BMO analysts also foresee a substantial uplift for Google Cloud, driven by increased dual-cloud adoption among enterprises. They project a 28% growth rate for Google Cloud, anticipating potential second-half gains in 2024 due to growing AI workloads and easier year-over-year comparisons.
The investment bank has slightly adjusted its 2024 and 2025 revenue estimates for Alphabet, with Search revenue now expected to reach $196 billion and $217 billion, respectively, up from previous estimates of $195 billion and $216 billion. YouTube revenue forecasts have been adjusted to $37 billion for 2024 and $43 billion for 2025, compared to earlier projections of $36.5 billion and $42 billion.
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