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Credit Suisse analyst Stephen Ju had an Outperform rating on Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) Google with a price target of 135.00.
The analyst sifted through the AI-related product announcements at Google I/O and Marketing Live.
He concluded that rather than the broader rollout of generative AI is potentially harmful to audience, engagement, or monetization. Google's direction has pointed to improving audience, engagement, or monetization.
The analyst believes generative AI will help more highly quality search traffic and increase the value of ad inventory - AI-generated content in the SERP to help aid the consumer to a more considered decision and engage in conversation/Q&A should increase search utility while delivering a more highly qualified user and better conversion rates.
Ju notes that Google has been incorporating AI into products for a long time, with significant strides in AI commercialization, and the lack of announced pricing likely curbs competitors' ability to charge for similar services and ultimately makes it more expensive for them to scale.
He believes generative AI helps deliver advertising democratization and TAM expansion.
The re-rating reflects ongoing monetization improvements in Search through product/AI-driven updates, the greater-than-expected contribution from non-Search businesses (YouTube, Cloud, and Play), optionality and shareholder value creation from new monetization initiatives like Maps, Discover tab, and the eventual commercialization of Google's Other Bets (Waymo, life sciences).
Price Action: GOOG shares traded lower by 1.18% at $123.95 on the last check Tuesday.
