Piper Sandler analyst Thomas Champion maintains Alphabet
Google's search share at ~93% in June '23 has increased ~50 bps versus late '22. That said, browser data does suggest minor share loss.
Given the maturation in Search, Champion thinks massive share shifts may be less likely today.
In April, Champion argued that AI is a real risk to Google Search revenues and estimated ~$15 billion 'at risk' by 2025E, or ~7% of the total. Informational searches are likely the most vulnerable.
While that might still be true, Google has not stood still since they introduced Bard into core Search, PaLM 2, new advertiser tools & Workspace integrations.
Gemini is an emergent LLM project. As for search, he thinks AI may increase total query volume and thus inventory.
Google has had a strong run YTD, up ~35%. Despite a strong YTD run (+35%), Google still trades at a ~15%+ discount on NTM earnings vs the '17-'19 period.
But the analyst thinks the valuation is still compelling, with the discount being more significant when compared to the SP500. He expects multiple normalizations as the narrative that Google is losing in AI search dissipates.
The next ~2-3 quarters for Search estimates also look beatable.
B of A Securities analyst Justin Post reiterates Alphabet with a Buy and a $128 price target.
Price Action: GOOGL shares traded higher by 1.66% at $121.89 on the last check Wednesday.
