TLDR
- Citizens JMP analyst Andrew Boone upgraded Alphabet stock to Outperform with a $220 price target, citing strength in AI Overviews feature
- AI Overviews is now available in over 200 countries and 40+ languages, driving 10% query growth in testing phases
- Google maintains 5 billion active users compared to OpenAI’s 800 million weekly users, with AI expected to be a “net tailwind”
- BNP Paribas analyst downgraded the stock to Neutral, warning about rising depreciation costs from massive AI infrastructure spending
- Apple’s Eddy Cue testified that Google search traffic on Apple devices declined in April for the first time in over 22 years due to ChatGPT competition
Alphabet stock received a boost from Citizens JMP analyst Andrew Boone, who upgraded shares to Outperform from Market Perform with a $220 price target. The upgrade comes as the Google parent company navigates intense competition in the artificial intelligence space.
Boone’s bullish stance centers on Google’s AI Overviews feature, which uses generative AI to provide quick summaries of search results. The feature is now available in more than 200 countries and over 40 languages.
The analyst expects AI Overviews to expand from 1.5 billion monthly users in Q1 2025 to 4 billion by Q3 2025. Testing shows the feature drives 10% query growth and is projected to cover about two-thirds of queries by next quarter.
Google’s scale advantage remains substantial. The search giant boasts more than 5 billion active users compared to OpenAI’s 800 million weekly active users. This disparity supports Boone’s view that “AI is a net tailwind” for Alphabet.
The analyst believes AI is expanding search opportunities by answering broader queries and improving monetization through better user intent understanding. He’s particularly optimistic about Smart Bidding Exploration and AI Max for Search Campaigns, two advertising tools that help commercialize more searches.
AI Competition Heats Up
However, the competitive landscape is shifting. Apple’s senior vice president of services Eddy Cue testified in federal court that Google’s search traffic on Apple devices declined in April for the first time in over 22 years. The culprit was alternatives like ChatGPT.
This decline carries weight given Google’s massive payments to Apple. The company pays billions annually to remain the default search engine on Apple devices, an arrangement that sparked antitrust concerns.
A judge ruled in 2024 that Google monopolized open-web digital advertising markets through these payments. The ruling called the practice anti-competitive, though Google plans to appeal and maintains it succeeded through innovation.
Infrastructure Investment Concerns
Not all analysts share Boone’s optimism. BNP Paribas Exane analyst Stefan Slowinski downgraded Alphabet shares to Neutral from Outperform with a $172 price target.
Slowinski’s concerns focus on massive infrastructure spending. Alphabet plans to invest around $75 billion in capital expenditure this year, primarily for data-center capacity to support AI services.
The analyst warns that depreciation costs will rise across major cloud providers. He expects the depreciation-to-sales ratio to jump from 6% to 18% by decade’s end for hyperscalers including Alphabet, Amazon, Meta, and Microsoft.
This spending could pressure profitability. Slowinski believes earnings growth between hyperscalers and the broader S&P 500 will converge, contrasting with recent outperformance.
Wall Street Sentiment
Despite mixed analyst views, Wall Street remains largely bullish. Of 72 analysts polled by FactSet, 60 rate Alphabet at Buy or equivalent while 12 rate it Hold. No analysts rate the stock Sell.
The average price target of $199.20 suggests 15% upside potential from current levels. However, shares have declined more than 8% year-to-date, underperforming the broader market.
Boone ranks 795th among more than 9,600 analysts on TipRanks with a 53% success rate and 8.5% average return per rating. His upgrade reflects confidence that AI will drive growth rather than cannibalize existing search revenue.
Citizens JMP’s previous downgrade centered on potential antitrust penalties, making Apple’s relationship a key risk factor. The ongoing remedies trial could force Google to lose distribution channels if penalties prove severe.
Alphabet shares fell 0.3% to $173.06 in afternoon trading following the upgrade, while the Nasdaq Composite rose 0.5%. The stock’s performance will likely depend on AI Overviews adoption rates and resolution of legal challenges.
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