Analysts bet on Alphabet amid stock slump. Are ChatGPT concerns overblown?

The share price of Alphabet, which owns Google, now represents an «attractive entry point» for long-term investors, Jefferies said. He believes investor concerns about the company's competitiveness in artificial intelligence are overblown. Analysts at Citizens agree with Jefferies: they expect Alphabet's share price to rise by about 20%, with the stock among the worst performers in the «Magnificent Seven» this year.

Since the beginning of 2025, Alphabet slumped by more than 8%, the third worst performance among the «Magnificent Seven» players after Tesla and Apple and lagging behind the Nasdaq 100 technology index. It, by contrast, increased by 6.5% over the same period. The weak performance of Alphabet's stock in 2025 shows investors' AI fatigue and their concerns about the company's competitiveness in this area, notes Yahoo Finance.

Nevertheless, contrary to the traders' worries, two analysts at once predicted the company's shares to grow by at least 20% more just due to the successes in AI.

Jefferies analyst Brent Till reiterated a buy recommendation on Google's parent company and left his target price at $210 per share - 20% above the last closing price. And Citizens analyst Andrew Boone upgraded the company's stock from Market Perform («on par with the market») to Outperform («above market»), equivalent to a buy recommendation, and set the target price at $220, reports CNBC. The new implied is up another 26% from the closing price on June 27.

Jefferies analyst Brent Till has highlighted five key reasons why Alphabet remains one of the best consumer AI companies. Till believes that concerns about Google's competitiveness in the AI era are greatly exaggerated and that the current stock valuation offers an «attractive entry point» for long-term investors.

- The resilience of Google's search engine amid competition from chatbots like ChatGPT or Perplexity. Google's share of the search market remains at 90%, and its AI features are gaining popularity: for example, AI Overviews, which shows a brief summary of a search query at the top of a page, is used by 1.5 billion monthly active users.

- YouTube is an undervalued Alphabet asset. With revenue 30% higher than streaming giant Netflix, the stock still trades at a lower market multiple than Netflix, even though it is the video format that is one of the main drivers of online consumption today.

- Alphabet's Gemini language model. Though it hasn't garnered as much attention as ChatGPT, it analyzes 480 trillion units of text per month - that's 50 times more than it did a year ago. Its integration into Google's ecosystem strengthens the company's position in AI in the long term.

- Google Cloud. Google's cloud business is still behind peers Amazon and Microsoft, but Jefferies sees potential in this area thanks to its leadership in AI infrastructure and contracts with the U.S. government. Meanwhile, Alphabet's profitability is on the rise, with operating margins hitting a record 40% in the first quarter of 2025, and the company has $84 billion on hand for share buybacks and investments.

- Jefferies' key argument is its low valuation of the company's stock relative to earnings before interest, taxes, depreciation and amortization (EV/EBITDA). This multiple is now 11 - below the 10-year historical average (12.4) and recent highs (15) - making the stock attractive from a risk-to-potential-return ratio perspective, Till says.

Citizens analyst Andrew Boone agrees with his Jefferies colleague that Alphabet shares could rise significantly in the coming months on the back of the AI boom. He, too, notes that ChatGPT's influence is not yet large enough to take much market share away from Google's search engine. He says Google's AI feature in queries expands the search experience by covering more different types of queries and improving monetization by understanding user intent more accurately. Boone expects the number of users of the feature to reach 4 billion per month as early as the third quarter. By comparison, it had only 1.5 billion users in the first quarter.

«Since AI Overviews launched in the U.S. in May, we've seen a 10% increase in search volume,» Boone noted. - The bottom line is that AI is increasing search usage faster than ChatGPT can take away share.» Because of this, he also predicts that Alphabet's search revenue will accelerate as early as the second half of the year.

Alphabet's stock price was almost unchanged in trading on June 27. Among 72 analysts, who assigned ratings to the company's securities, none of them advises investors to sell them. The vast majority - 60 - suggest buying (Buy and Overweight ratings), while the rest suggest holding (Hold). The securities have an average target price of $199.5, suggesting a potential upside of another 15% from the June 26 close.

This article was AI-translated and verified by a human editor