Hua Er Jie Jian Wen·2025-10-03 05:54Core Insights - Google's stock performance has rebounded strongly due to positive reactions to its Gemini AI product, following earlier concerns about AI positioning and antitrust scrutiny [1] - Morgan Stanley's analyst Brian Nowak has raised Google's earnings forecasts, increasing the expected EPS for FY2026 by 3% and for FY2027 by 4%, leading to a target price increase from $210 to $270 [1][4] - The market is optimistic about Google's ability to leverage AI momentum in its search and cloud businesses for stronger profit growth in 2026 and 2027 [1][2] Group 1: Stock Performance and Market Sentiment - Google's stock has risen 29% this year, outperforming the S&P 500 index, as the market recognizes its AI capabilities [2] - The narrative on Wall Street has shifted positively as the worst fears regarding Google's AI strategy and antitrust issues seem to have passed [2] Group 2: Earnings Forecast and Valuation - Nowak's new target price of $270 represents a 22x multiple of Google's projected EPS for 2027, which is a 10% premium over its historical average of 20x [4] - The premium is justified by Google's faster innovation pace and emerging position as a winner in generative AI, which is expected to drive sustainable growth in its core business [4] Group 3: Competitive Landscape - OpenAI, represented by ChatGPT, poses a significant commercial challenge with aggressive strategies, including a new product that allows shopping directly within chats [5] - Nowak suggests that Google's accelerated product improvements may hinder ChatGPT from creating substantially differentiated products [5] - The future stock price trajectory will largely depend on Google's ability to maintain its market share amidst competition, with potential target prices ranging from $335 in a bullish scenario to $180 in a bearish scenario [5]