Stifel resumes Alphabet coverage at Buy, sees nearly 30% upside potential

Stifel analysts resumed research coverage of Alphabet (NASDAQ:GOOGL) at Buy with a price target of $130 per share.

Despite investor concerns about the success of Microsoft’s (NASDAQ:MSFT) Bing search engine on the back of the OpenAI integration, the analysts remain positive that Google will maintain its large market share.

“We don’t expect the public as a whole to change their daily habits regarding search behavior (Google is a verb, at least today). In an attempt at being conservative, we model share loss of 150bps for each of 2023 and 2024 in the Search business (revenue share) against GroupM’s Search forecasts,” they wrote in a note.

While the AI integration will increase costs at Google, the analysts believe the higher operating expenses will be offset by reductions in other units.

On the regulation front, they added:

“We expect Google to take preemptive steps that may appease regulators before there is a resolution to the DOJ case, though a SOTP analysis favors stripping out its GAM division into a separate entity, in our view.”

Finally, the analysts see a “substantial opportunity for YouTube and YouTube TV against the combined Linear and CTV+ landscape.”

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