Investing.com - Google-owner Alphabet (NASDAQ:GOOG) faces a "pivotal" year in 2025 as the tech giant attempts to bolster its position in the artificial intelligence arms race and combat headwinds to its key search business, according to analysts at Bank of America (NYSE:BAC).
In a note to clients upgrading their price target for the stock to $225 from $210, the analysts noted that Alphabet's stock price surged by 35% in 2024, buoyed by new product launches which helped offset concerns around the impact of growing AI players on its search operations.
Still, they flagged that the threat from rival search platforms powered by generative AI remains, while a ruling by a judge last year that Google (NASDAQ:GOOGL) had illegally stifled competition to become the world's default search engine has weighed on Alphabet's multiple versus its peers.
"With search still far overshading value of other businesses, we view 2025 as a pivotal year, which could help establish Google as either an Al leader [...] or see elevation in search disruption risk," the BofA analysts said.
The comments come after Alphabet reported third-quarter results in October that topped Wall Street estimates thanks to an uptick in advertising revenue that helped assuage some concerns around the threat of competition from AI search products.
The company reported earnings of $2.12 per share on revenue of $88.27 billion, compared with expectations for $1.84 and $86.37 billion, respectively.
Advertising revenue rose to $65.85 billion in the third quarter from $59.65 billion in the prior-year period, with ad revenues at its YouTube video service in particular increasing to $8.92 billion from $7.95 billion.
Revenue at its Google Cloud division jumped 35% year-over-year to $11.35 billion from $8.41 billion, also above consensus estimates.