Goldman Sachs: Don't doubt Google's AI strength, Alphabet (GOOGL.US) pullback is a good buying opportunity

The Zhitong Finance App learned that Google's parent company Alphabet (GOOGL.US) has been adjusted 9% since the beginning of the year, but according to Wall Street financial giant Goldman Sachs, Google still has an absolute dominant position in the search engine field. More importantly, according to the Goldman Sachs analysis team, despite facing anti-monopoly pressure and Google still being a catcher compared to OpenAI in terms of generative AI applications, Google's overall AI strength is still at the top of the world's ranking with OpenAI, Anthropic, and XAI, and Google is becoming more and more advanced AI Technology continues to be deeply integrated with core businesses such as search engines, digital advertising, and cloud computing, which is expected to strongly push Google to lead the way in AI monetization speed among global technology companies.

The stock analysis team led by Goldman Sachs analyst Eric Sheridan gave Google's parent company Alphabet a “buy” rating and emphasized that the company's stock price pullback is an excellent opportunity for investors to allocate Google shares to obtain excessive profits. Goldman Sachs gave Google's parent company Alphabet a target share price of up to 220 US dollars within 12 months. As a comparison, by the close of US stocks on Monday, Alphabet's stock price closed at $169.030.

Although investors in the stock market are still concerned about the speed of AI monetization by tech giants, as well as the anti-monopoly regulatory resistance Alphabet has faced since this year and the continuing competitive pressure faced by the advertising and cloud computing business, Goldman Sachs analyst Sheridan pointed out that negative sentiment has been overvalued by the market. As long as Alphabet implements a long-term AI growth strategy, stock prices are expected to rebound.

Goldman Sachs expects Google's parent company's “search and other” business revenue to surge from US$1980 billion in 2024 to US$318 billion in 2030. The search engine business will remain the core engine of Alphabet's revenue, and is expected to embark on a new growth trajectory with the help of Google's AI technology. Meanwhile, first-party data and a global data center network provide support for Google AI's deep integration with YouTube, Google Cloud Platform, Maps, and Workspace under Alphabet, driving the revenue generation capacity of these businesses to expand beyond expectations.

The analysis team led by Sheridan also emphasized that under the promotion of the AI developer ecosystem with Google AI as the core, Alphabet's cloud computing business division and digital infrastructure platform will jointly lay a solid foundation for Alphabet's future performance growth, even if short-term advertising spending faces fluctuations.

Goldman Sachs emphasized that Alphabet is well worth investors' long-term attention because of limited downside risks and strong long-term cash flow from search, digital advertising platforms, and all AI-related businesses, Google's parent company has the potential to continue to rise after short-term concerns have completely dissipated. Alphabet will release its next financial data in late July. The market will pay close attention to the signs of AI monetization and cloud computing business acceleration, and how the combination of AI and search engines innovates and continues to drive Google's advertising business growth.

Needless to say, Alphabet has dominated the Internet search engine sector for a long time. However, the speed of AI monetization, anti-monopoly regulatory pressure, and competition in advertising and cloud services have made investors increasingly concerned, causing the stock price to drop about 9% from the beginning of the year to date. Despite this, the analysis team led by Goldman Sachs analyst Sheridan believes that the current Alphabet valuation is attractive for investment, and reaffirms the most optimistic bullish rating of “buy”. The target price is as high as $220. The core logic lies in Alphabet's long-term business portfolio advantages and the current very favorable risk/reward pattern.

Sheridan pointed out that Alphabet's current valuation has basically reflected negative sentiment. In particular, most of the market prudence relating to antitrust that may force Google to split the Chrome browser business has been measured, forming a very attractive risk/reward allocation, leaving room for the company's stock price to rebound drastically after implementing a long-term strategy.

The team led by Sheridan also mentioned some of the key advantages that have been underestimated by the market for a long time, including Alphabet's extensive reach in the AI field and its strong ability to use first-party data and AI technology leading most of its peers to improve the Google product experience. Overall, with limited downside risk and long-term growth potential in search, advertising, and AI, Sheridan believes the stock is still a strong choice for investors willing to ignore short-term concerns.

Overall, TIPRANKS rating data shows that Wall Street analysts gave a consistent “strong buy” rating on Google's parent company Alphabet's stock outlook, with 28 “buy” and 9 “hold” ratings in the past three months. Wall Street analysts say that Google's average price target for 12 months is $199.14 per share, which means a consistent upward potential of about 15.95%. The most optimistic expectation is that the stock price will rise to $225, and the most cautious is to expect the bottom to be $185. After a year of relatively weak stock prices and performance, analysts are generally optimistic and expect Alphabet to achieve a strong return on investment in growing trends in core markets such as AI, cloud computing, and digital advertising.