Alphabet (Buy, target rises to $380) Frontier AI winner confirmed, but some near-term EPS risk
Our target increases to $380 from $330 on higher revenue, adj. EBITDA, EPS and long-term FCF (partially offset by lower near-term FCF due to higher capex).Investment Thesis: GOOGL has given back some gains after the print, understandable considering the post-Search remedies multiple expansion. The higher capex has sunk into near-term FCF estimates and DCFs, but strong Search performance and a game-changing quarter from Cloud give us confidence in long-term AI ROIC.
Alphabet is a holding company. Through its subsidiaries, the company is engaged in a collection of businesses, which its primary business is Google. The company reports all non-Google businesses collectively as Other Bets. Google's main products and platforms are Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube. The company also provides advertisers with tools that help them attribute and measure their advertising campaigns. In addition, Other Bets includes Access, Calico, CapitalG, GV, Verily, Waymo, and X, among others. Other Bets primarily engages in the sales of internet and TV services through Access as well as licensing and research and development services through Verily.
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