On Friday, BMO Capital Markets maintained their Outperform rating on Alphabet shares (NASDAQ:GOOGL) and increased the price target to $230.00 from the previous $217.00. BMO's analyst cited a positive outlook on the company's revenue streams, including Search, Google Cloud Platform (GCP), and YouTube, following comprehensive channel checks.
The analyst's optimism is rooted in the enhancements made to Alphabet's Search and GCP. The introduction of PMax, which stands for Performance Max, is noted to improve Return on Ad Spend (ROAS) for Search.
Moreover, the deployment of Gemini, which is capable of handling complex queries, is seen as a factor that unlocks Total (EPA:TTEF) Addressable Market (TAM) potential. GCP's growth is attributed to improvements in its middle layer, particularly through the integration of Gemini and Vertex (NASDAQ:VRTX) AI technologies.
YouTube is also a significant contributor to Alphabet's positive assessment. The platform's introduction of lower-funnel Quick Response (QR) codes has been well-received by advertisers, indicating a strong connection between the feature and its ability to drive advertising effectiveness.
PMax is improving ROAS for Search, while Gemini unlocks TAM potential, given its ability to handle complex queries. GCP is benefiting from middle-layer improvements with Gemini/Vertex AI. YouTube's lower-funnel QR codes resonate well with advertisers. Reiterate Outperform rating and increase estimates and our target price to $230 from $217," the analyst explained.
The adjustments to the price target and the affirmation of the Outperform rating reflect BMO Capital's confidence in Alphabet's continued growth and innovation across its diverse range of services.
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