MORGAN STANLEY: Google is well positioned for ‘multiple waves of future growth’

Alphabet CFO Ruth Porat

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Alphabet CFO Ruth Porat
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Google

  • Google’s diverse segments of cloud computing, AI, hardware, and YouTube could drive the stock to $1,200, Morgan Stanley said Tuesday.
  • The bank hosted Alphabet’s Chief Financial Officer Ruth Porat on Monday and released a note to clients based on their conversations.

Morgan Stanley hosted Alphabet CFO Ruth Porat on Monday, and says the company is well positioned for “multiple waves of growth,” based on their conversations.

GOOGL remains focused on investing for the long-term and sees multiple waves of growth ahead across its core ad business, Cloud, Hardware, YouTube, and Other Bets,” a team of analysts lead by Brian Nowak said in a note to clients Tuesday morning.

On the cloud front, Google’s number of public cloud deals worth more than $1 million more than tripled in 2017 compared to the previous year. On Monday, even Apple admitted it uses Google’s cloud services to power iCloud.

“On hardware,” the bank said Porat “talked about building a comprehensive, AI-integrated product suite,” something it has been building up through its Google Home speaker, Pixel phones, laptops, and headphones.

YouTube, however, has been a headache for Google in recent months, as it grapples with rampant abuse and angry advertisers.

“On YouTube, GOOGL stressed new brand safety measures it has put in place to reassure advertisers and users that the platform will remain free from abuse….and highlighted that it expects to release 20-30 original programs in ’18, following the 55 total since ’16,” said Morgan Stanley. “YouTube TV is also a focal point.”

The bank has a $1,200 price target for Alphabet, 5% above where shares opened Tuesday.

Morgan Stanley said recently that Alphabet could easily be a $1 trillion company, the first in the US, if it was more transparent about its other bets, something the bank doubled down on in this latest note.

“As seen with other tech companies (AMZN, MSFT), clearer recurring disclosure can enable investors to better understand and value underlying business drivers and opportunities,” Nowak said earlier in February. “Our sum of parts work speaks to how disclosure could drive GOOGL toward ~$1,400 per share (~$1trln in equity value).”

The company’s market cap is currently $723 billion. Shares have gained 34% in the past year.

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Markets Insider