Google's Competitive Advantages Are Already Priced Into The Stock

Although Alphabet Inc GOOG GOOGL is a dominant player in the global advertising market, the stock already reflects the company’s “formidable competitive advantages in the digital ad market and its AI [artificial intelligence] fueled innovation,” Loop Capital Markets’ Blake Harper said in a report.

Harper initiated coverage of Alphabet with a Hold rating and a price target of $800.

Position Of Strong Market Leader

“We expect Alphabet's Google business to remain a market-leading performance advertising and brand advertising platform despite recent concerns and boycotts from large advertisers,” the analyst wrote.

Google has a number of online services, and each of these have more than 1 billion monthly active users, including Search, Android, Maps, Chrome, YouTube, Google Play and Gmail. Harper believes the company’s “key competitive advantage” would lie in its ability to infuse machine learning [ML] and artificial intelligence [AI] capabilities into all its services.

Alphabet should be able to successfully penetrate deeper into the enterprise market, given its collaborative cloud-based business services.

Despite facing continued pricing and traffic acquisition cost pressure from the ongoing transition to more mobile traffic, the company would be able to generate revenue growth at a 17 percent CAGR through 2019, with adjusted EBITDA margins of more than 40 percent, the analyst stated.

He added, however, that most of the growth opportunity seemed already priced into the shares.

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