Needham analyst Laura Martin has reaffirmed her bullish stance on Alphabet Inc (GOOGL), maintaining a ‘Buy’ rating with a price target of $210. Martin has declared GOOGL as her top large-cap stock pick for 2024, citing a favorable macroeconomic environment, record political ad spending, Google’s data advantages, and the integration of Generative Artificial Intelligence (GenAI) technologies.
The analyst underscores Google’s compelling long-term growth potential, driven by its global dominance in advertising revenue and its strong digital market moat. She particularly highlights YouTube as a key driver of rapid subscription revenue growth. Martin expects Google’s proprietary large language models (LLMs), with thousands of small and medium-sized businesses developing applications on these platforms, to be the primary source of upside value over the next 3-5 years.
In her analysis, Martin draws upon insights from conversations with the CEO of a GenAI infrastructure company, who identified Google and Amazon.Com Inc (AMZN) as the most likely winners in the current race to develop and deploy GenAI tools, features, and capabilities.
This race is fueled by massive investments in cloud infrastructure. Companies have poured $1.3 trillion over the past 12 years to build out their public cloud offerings. Notably, Amazon and Microsoft Corp (MSFT) took six years to achieve profitability from their respective cloud businesses. However, the CEO highlighted that GenAI is a significantly larger market, projecting a total capital expenditure of $5 trillion to $6 trillion for new data center infrastructure required to support GenAI development. He expects hyperscalers, like Google, Amazon, and Microsoft, to spend $250 billion in 2024 alone on GenAI infrastructure projects, a fivefold increase from the $50 billion annually invested six years ago to build their cloud infrastructures.
Martin further notes that the CEO believes GenAI has already generated over $100 billion in revenue within just 18 months. He anticipates that GenAI business demands in 2024 will outpace GenAI capacity by a factor of two.
Based on these insights, Martin projects fiscal 2024 revenue and earnings per share (EPS) of $346.40 billion and $7.62, respectively.
GOOGL shares closed at $165.19 on Monday, up 1.37%.
