3 Reasons To Like Alphabet's Stock

Alphabet Inc GOOG GOOGL boasts a favorable combination of intellectual property and financial resources that positions its well to grow over the longer term above current expectations, according to Guggenheim.

The Analyst

Guggenheim Partners' Michael Morris initiated coverage of Alphabet with a Buy rating and $1,330 price target.

The Thesis

The bullish case for Alphabet's stock is based on three unique factors, Morris said in a note.

1. Online Video

The company's leadership position in informational and transactional searches and online video can be sustained over the longer term. Specifically, the company's strong secular usage tailwinds coupled with its efficient ad pricing supports a multi-year revenue growth profile.

2. Ads

Google is losing some advertising revenue in search to Amazon.com, Inc. AMZN, but put in perspective Amazon doesn't appear to be a threat to Google's advertising business. Specifically, Amazon is gaining ad share among packaged consumer goods companies where it already dominates but this category represents a small portion of the total digital ad market.

Meanwhile, the company could gain ad share in its YouTube property where it has yet to monetize video traffic at a level that is consistent with its leading usage.

3. Engagement

Alphabet is committed to adding new functionality to its products that not only improves its platform, but prompts users to spend more time with the products. In fact, consumer engagement with Google's products continues to expand at a faster rate compared to the overall Internet.