Evercore ISI's Mark Mahaney on Alphabet: ‘The fundamentals look great'

Core Viewpoint - The stock of Alphabet has experienced a significant recovery, doubling in value over the past six months, driven by strong fundamentals and a shift in market sentiment [1][2][3]. Company Fundamentals - Alphabet's fundamentals have remained consistent, contrasting with the recovery patterns seen in other tech stocks like Meta and Netflix, which were recovering from broken fundamentals [2]. - The company is positioned as a leader in AI, with a robust monetization strategy and the lowest cost infrastructure due to its vertical integration [4][5]. - There is an expectation of accelerating growth in search revenue, YouTube, and Google Cloud, with the latter projected to maintain growth in the mid-30% range [7]. Market Sentiment and Valuation - The market was overly negative on Alphabet six months ago, primarily due to concerns over the DOJ and competition from ChatGPT, leading to the stock being oversold at 15 times earnings [3]. - Currently, the stock is trading at 29 times earnings, but it is not considered overbought due to strong fundamentals [3][6]. - The narrative around Alphabet has shifted positively, with the company now seen as a high-quality compounder, similar to Meta [8]. Competitive Landscape - The competition from ChatGPT and OpenAI is acknowledged, with expectations of an ad model launch that could impact the market in the next few years, but it is not anticipated to affect Alphabet's revenue in the short term [7]. - The robo-taxi market is dominated by Alphabet, showcasing its innovative capabilities and market leadership [7].