GOOGL Rides on Strong Pixel 9 Shipment Growth: Time to Buy the Stock?

Core Viewpoint - Alphabet's Google is experiencing significant growth in the U.S. smartphone market, primarily driven by the successful launch of the Pixel 9 series, which has led to a 20% year-over-year increase in shipments in Q3 2024 [1][2][3]. Smartphone Market Performance - Google's smartphone shipment growth of 20% in Q3 2024 is the second highest in the U.S., trailing only Motorola, while Apple and Samsung saw declines of 2% and 13%, respectively [2]. - Overall, U.S. smartphone shipments declined by 4% year over year due to sluggish demand [2]. - The early release of the Pixel 9 series on August 22, 2024, contributed significantly to Google's market share, which rose from 4.76% in September to 12.9% in October [4]. AI Integration and Features - Google is leveraging AI and Generative AI to enhance Pixel devices, utilizing Google Tensor G4 chips that improve performance, allowing users to browse the web 20% faster and launch apps 17% faster on average [5]. - AI features in Pixel devices include advanced photography capabilities and tools like Pixel Studio, which generates images using on-device AI models [6]. - The Pixel Weather app and Call Assist feature utilize AI for improved user experience, including accurate forecasts and spam call screening [7]. Financial Performance and Market Position - Alphabet's stock has returned 4.1% over the past month, outperforming the Zacks Computer & Technology sector and the Zacks Internet Services industry [8]. - The Zacks Consensus Estimate for Alphabet's 2024 revenues is $298.73 billion, indicating a growth of 16.46% over 2023 [14]. - The consensus for 2024 earnings is $8 per share, suggesting a growth of 37.93% from 2023 [15]. Cloud and AI Business Growth - Google Cloud has solidified its position as the third-largest provider in the cloud infrastructure market, competing with Amazon and Microsoft [12]. - The Enterprise AI platform Vertex is gaining rapid adoption, with BigQuery machine learning operations experiencing 80% growth over the past six months [13]. Valuation and Investment Outlook - Alphabet's stock is currently considered overvalued, with a forward Price/Sales ratio of 6.35X compared to the industry average of 5.98X [16]. - Despite valuation concerns, Alphabet's strong position in the search engine market and cloud services, along with growing GenAI capabilities, suggest potential for future growth [17].