Source: davit kirakosyan
Citizens Ups Price Target on Alphabet
In recent investment news, Citizens Financial Group has revised its price target for Alphabet Inc. (NASDAQ: GOOGL), the parent company of Google. The Rhode Island-based bank raised its target from $340 to $385 while maintaining a Market Outperform rating. The upward revision comes on the back of Alphabet’s improving search engine fundamentals and the presence of multiple medium-term growth drivers. The move is an indication of the optimism and confidence in Alphabet’s business prospects.
Alphabet’s Shares Surge Amid the Pandemic
Over the past few months, Alphabet’s shares have shown remarkable performance. The firm noted that Alphabet’s shares had more than doubled from their May lows, triggering a reassessment of estimates and valuation assumptions. The revision was mainly driven by a reacceleration in the company’s core business – search. Alphabet’s search engine, Google, is a dominant force in the industry, and recent trends suggest a further acceleration in search revenue. The firm believes that the search acceleration would continue into the fourth quarter of fiscal 2025, which it views as the key near-term question for investors.
Potential Growth Drivers for Alphabet
The analyst at Citizens Financial Group highlighted several medium-term catalysts expected to fuel Alphabet’s growth over the next few years. These include Alphabet’s numerous projects and innovations such as Gemini, Google Cloud, Waymo, and custom Tensor Processing Units (TPUs). These ventures are expected to support a broader inflection in results during 2026 and 2027.
Specifically, on the search front, the firm noted that query growth seemed to be accelerating due to the implementation of AI Overviews, AI Mode, and Gemini, which are driving higher user engagement. In an innovative move, the introduction of Smart Bidding Exploration is expanding Google’s advertising load by linking advertisers to user intent rather than sticking to the traditional method of keyword targeting. This new approach has the potential to increase the proportion of queries linked to ads, enhancing the effectiveness of Google’s advertising platform.
Smart Bidding Exploration Boosts Advertising Load
Citizens pointed out that the third quarter marked the first full period with Smart Bidding Exploration in place. This tool uses machine learning algorithms to optimize ad delivery, enabling advertisers to reach potential customers who are more likely to perform the desired action. The firm expects the fourth quarter to reap similar benefits, supported by a stable macro backdrop for holiday advertising spend.
Based on these factors, Citizens increased its price target on Alphabet and reiterated its Market Outperform view. This outlook reflects a belief in Alphabet’s continued strong performance and potential for further growth, even amidst economic uncertainty. As Alphabet continues to innovate and diversify its portfolio, investors can likely look forward to robust returns in the coming years.
Conclusion
With a new price target set against Alphabet’s stock, it indicates the unwavering belief in the tech giant’s ability to sustain its market lead and continue its growth trajectory. The company’s focus on improving search fundamentals, coupled with its innovative initiatives like Smart Bidding Exploration, Gemini, Google Cloud, Waymo, and custom TPUs, is expected to be the key driver of its future growth. As such, Alphabet remains a compelling choice for investors looking for exposure to the technology sector.