That's more in line with our Club thesis.
Google risks creating a near-term revenue air pocket by cannibalizing prime real-estate for their gen-AI results, which will take time for ad buyers to adopt." They also called out the risk of increasing competition, Meta regaining market share, shifting consumer behaviors and some "some near-term AI-related monetization risks all contributing to pressure Google Search growth." That said, Bernstein and UBS both also acknowledge that longer-term generative AI may very well prove a tailwind for Alphabet. At UBS, the analysts said, "We see medium-term revenue risk from new search (SGE) displacing ad inventory with gen-AI responses, which may take time to optimize." Bernstein analysts said, "After being criticized for moving too slowly on Generative AI, Google has been aggressively shipping gen-AI products and starting to integrate Bard into Google Search results. Analysts at both firms expressed concern over how the implementation of generative AI might hurt search-related ad revenues and boost expenses. GOOGL YTD mountain Alphabet YTD performance Starting with a closer look at Alphabet, both the Bernstein and UBS downgrade notes cited near-term headwinds more than anything structural or material in the long term. While most investors would have been overjoyed by either of those returns in last year's terrible bear market, Meta's cost-cutting moves and solid execution in 2023 have been rewarded to a greater degree than Alphabet's fits and starts. The Google parent has only risen nearly 35%. The Facebook owner has jumped nearly 140% in 2023. The case for META over GOOGL has been on display in this year's tech-driven rally. UBS downgraded the stock early Monday but raised its PT. Bernstein late Monday downgraded GOOGL to market perform from outperform (to hold from buy) with a $125 price target. One day after UBS raised its price target on META, Citi on Tuesday increased its price target on the stock to $360 per share from $315 and kept its buy rating. Since we have a longer investment horizon at the Club, we see room in our portfolio for both stocks at the moment.
We understand the current desire to call out something of a pair trade - selling Alphabet and buying Meta Platforms - on the part of analysts that cater to clients with shorter investment horizons. Wall Street analysts continued to favor Meta Platforms (META) over Alphabet (GOOGL), sending shares of META up more than 3% and GOOGL shares just slightly higher Tuesday. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit
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