Why Analysts Are Staying Bullish on Google After Search Worries Sparked Sell-Off
Key Takeaways
- Morgan Stanley said it’s “time to buy” Google parent Alphabet’s stock after a major sell-off Wednesday.
- The drop was spurred by worries Apple is looking to add AI search options to its Safari browser, which could ultimately replace Google.
- Several analysts pointed to Google’s advances in AI and dominance in the search industry as reasons to remain bullish.
- Google is currently the subject of antitrust proceedings after a judge ruled it operated an illegal monopoly in online search.
Google parent Alphabet (GOOGL) lost about $150 billion in market capitalization Wednesday amid worries it could lose ground to AI-powered search options. Morgan Stanley says it’s an opportunity to buy the stock.
“GOOGL sentiment has (again) troughed due to AI-disruption fears,” Morgan Stanley said, referencing an Apple (AAPL) executive’s comments that the iPhone maker is looking to add AI-powered search options to its Safari browser, and suggested they could eventually replace Google, which is currently Safari’s default search engine.
However, Morgan Stanley argued that competitors in the space like OpenAI, Meta (META), and Perplexity “don’t yet have large enough user bases or compelling enough products,” to drive customers away from Google.
Shares of Alphabet were up 2% close to $155 in recent trading Thursday, after plunging 7% a day earlier. Morgan Stanley maintained its price target of $185, and said it’s “time to buy” the stock.
Jefferies analysts noted that Chrome holds a 66% browser share compared to Safari’s 17%. Google has also made its own progress in AI, with AI Overviews in Search reaching 1.5 billion monthly active users. “While we agree there are emerging alternatives to Google Search, GOOGL is not standing still,” the analysts said.
Jefferies reiterated its $200 target, calling yesterday’s sell-off “overdone.” JPMorgan and Citi affirmed their targets of $195 and $200, respectively.
Still, one serious risk to Google’s search dominance is antitrust enforcement. Last August, a federal judge agreed with Justice Department prosecutors that Google operated an illegal monopoly in the online search market. The Apple executive’s comments were part of testimony in a court proceeding Wednesday meant to find a remedy to that monopoly.