Alphabet(US:GOOGL) Soochow Securities international·2024-05-28 07:31Investment Rating - The report initiates coverage with a "Buy" rating for Alphabet Inc. (GOOGL) [2][5]. Core Views - Alphabet is positioned as a likely winner in the ongoing AI revolution, with its major businesses—Search, YouTube, and Cloud Computing—expected to benefit from efficiency improvements and cost reductions brought by AI [5][6]. - The report forecasts significant revenue and net profit growth for Alphabet, driven by its strong technological reserves and product layout [5][6]. Summary by Sections 1. Company Overview - Alphabet has evolved from a search engine to a diversified technology giant, emphasizing innovation and a multi-dimensional ecosystem [14][21]. 2. Financial Analysis - Alphabet's revenue is primarily derived from three segments: Google Services, Google Cloud, and Other Bets, with Google Services contributing the majority [23]. - In 2023, Alphabet's total revenue was $307.39 billion, with a year-on-year growth of 8.68% [3][27]. 3. Advertising Business - Google Search maintains over 90% market share in the global search engine market, with advertising revenue expected to grow by 12.8%/10.8%/9.8% from 2024 to 2026 [5][6]. - YouTube is projected to see advertising revenue growth of 24.2%/13.2%/11.5% from 2024 to 2026, benefiting from major events like the Paris Olympics and the US presidential election [6][7]. 4. Cloud Business - Google Cloud is expected to experience revenue growth of 28.5%/26.0%/24.0% from 2024 to 2026, driven by AI empowerment and a growing user base [7][8]. - The report highlights Google Cloud's competitive pricing strategies and innovative hardware as key factors for its growth [7][8]. 5. Earnings Forecast & Valuation - The report forecasts Alphabet's revenue to grow by 14.8%/11.9%/11.0% from 2024 to 2026, reaching $352.9 billion, $394.7 billion, and $438.2 billion respectively [5][6]. - Net profit is expected to grow by 28.1%/12.7%/13.2% during the same period, reaching $94.5 billion, $106.5 billion, and $120.6 billion [5][6]. - A target price of $230 is set, corresponding to a 2024 P/E ratio of 30x, indicating a potential upside of approximately 30% from the current price [5][6].