If you were in doubt as to the dominance of Alphabet (NASDAQ:GOOGL) in the internet search space, consider this: Google is responsible for 85% to 90% of global search queries. The upshot of this domination is $174 billion in search-related advertising revenue, representing ~57% of Google’s total revenue.
And the good news for the search giant is that over the course of 2H23 and 2024, worldwide digital ad spend is anticipated to accelerate. With this about to take place, Wedbush analyst Scott Devitt believes Alphabet is in a “leading position to capture a larger share of this advertising demand.”
Throughout FY23, Devitt anticipates that Google’s total ad revenue will increase by +5.6% year-over-year, and this growth is expected to accelerate to +10% in FY24. Alphabet has been preparing for the projected increase in demand and has taken steps to enhance the efficiency of its advertising offerings. Over the past few quarters, Alphabet has implemented several product improvements.
New tools have been developed, including an AI/ML-driven conversational interface in Google Ads. This interface simplifies the campaign construction process and enhances creative workflows’ efficiency. Additionally, new functionalities aimed at improving the relevance of keyword searches and implementing intelligent bidding strategies have been introduced. Furthermore, innovations like Merchant Center Next, which has seen a doubling in merchant participation over the past two years, have significantly supported small and medium-sized retail businesses, leading to improved efficiency and profitability.
Skai reports that by the end of Q2, 2 out of 5 Google accounts were utilizing Performance Max – Google’s goal-based campaign type designed to boost conversions. Google’s dominant position in the Search market has contributed to the widespread adoption of Performance Max.
YouTube ads have also been gaining momentum, while Devitt notes the “healthy traction” gained by YouTube Shorts, now watched by more than 2 billion logged users, up from 1.5 billion a year ago.
All the above elicits a glowing assessment from the 5-star analyst. “The company has successfully navigated changing industry and regulatory standards and continues to drive digital advertising innovation with new products like Performance Max that deliver significant value to advertisers, in our view,” Devitt summed up. “We believe Google is a long -term winner within the digital advertising industry with broad exposure and durable market share of overall media spending.”
Accordingly, Devitt rates GOOGL shares an Outperform (i.e., Buy) alongside a $160 price target, implying shares will climb 25% over the course of the year. (To watch Devitt’s track record, click here)
Most analysts agree with Devitt’s thesis. The stock claims a Strong Buy consensus rating based on a mix of 31 Buys and 5 Holds. The average target stands at $150.67, suggesting shares will appreciate by 15% in the months ahead. (See GOOGL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
