To paraphrase Mark Twain’s oft-cited quote, fears regarding the demise of Alphabet (NASDAQ:GOOGL) due to the advent of AI and its chatbots have so far proven to be a great exaggeration.
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Indeed, GOOGL’s most recent earnings report last week blasted away worries that Internet searches are turning into a thing of the past. The company’s revenues continued to surge upwards to $96.4 billion, a 14% increase year-over-year.
Moreover, the Google Search & other segment enjoyed double digit revenue growth (~12% year-over-year), while company leadership emphasized the strong performance of the new AI Overviews and AI Mode features.
In fact, one top investor known by the pseudonym Stone Fox Capital thinks that the bullish case for Alphabet will only be strengthening in the years to come.
“The key investor takeaway is that the golden goose of internet search is becoming the AI golden goose,” explains the 5-star investor, who is among the top 2% of TipRanks’ stock pros.
Stone Fox points to Alphabet’s “massive” sales beat, and particularly Google Cloud where revenues grew by 32% year-over-year. When it comes to Alphabet’s bread-and-butter search operations, the company’s AI Overviews feature has proven adept at keeping traffic humming at a healthy rate.
“The company shifting to AI Overviews isn’t having the feared impact on Search growth and is actually helping keep traffic on Google to feed Search revenue despite all of the growth from competition via OpenAI and other AI options,” adds Stone Fox.
Emphasizing the point, the investor notes that AI Overviews drove more than 10% of all search queries, the company’s Gemini app has more than 450 million active users, and the AI Mode has attracted more than 100 million users every month.
The company is clearly all-in on AI, and has recently upped its capex spending by an additional $10 billion for the year, with plans to deploy some $85 billion in total.
And yet, in spite of all these positives, GOOGL’s valuation is still “incredibly cheap.” For instance, GOOGL’s Forward GAAP Price-to-Earnings multiple of under 20x compares nicely with Apple’s nearly 30x, Microsoft’s 34x, and Meta’s ~28x.
In other words, Stone Fox believes the time is right to hop on board this “near unstoppable AI leader.”
The investor puts it succinctly: “My investment thesis remains ultra-Bullish on Google, with their AI leadership starting to shine.”
No surprise here, Stone Fox Capital is giving GOOGL a Strong Buy consensus rating. (To watch Stone Fox Capital’s track record, click here)
That’s exactly where Wall Street finds itself as well. With 27 Buy and 9 Hold ratings, GOOGL enjoys a Strong Buy consensus rating. Its 12-month average price target of $215.18 has an upside of ~10%. (See GOOGL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.