Proactive Investors - Google parent Alphabet (NASDAQ:GOOGL) Inc (NASDAQ:GOOG)'s first quarter earnings have further showcased the company’s position as a leading AI beneficiary, analysts at Wedbush believe.
The analysts raised their target price from $175 to $205 on improved revenue and operating income estimates. They have an ‘Outperform’ rating on the stock.
Shares of Alphabet surged almost 10% to $173 following the release of its Q1 report.
Its earnings beat estimates driven by better-than-expected Search and YouTube results, accelerating Cloud growth of 28.4% year-over-year, and margin expansion due to ongoing cost discipline.
It also announced its first-ever dividend of $0.20 per share and a $70 billion share repurchase program.
“We come away from results incrementally positive given the implications for near-term growth and margin, as well as commentary from management related to search generative experience (SGE) that should alleviate longer-term investor concerns regarding the sustainability of the Search business,” they wrote.
They highlighted management’s commentary which directly addressed the structural risks of generative AI on Google’s Search business.
“Early feedback on SGE has been positive and the company is observing higher engagement and a broadening of use cases to longer and more complex queries,” they wrote.
“Importantly, Google has already reduced the costs associated with SGE responses by 80% in the past year, and we expect the company will continue to optimize the economics of SGE prior to a broader launch.”
They concluded: “Alphabet remains on our Best Ideas List and we reiterate our ‘Outperform’ rating.”
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