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Alphabet (GOOGL) Rides on Strength in Google Services Segment

Alphabet’s GOOGL shares have rallied 26.7% in the year-to-date period, outperforming the Zacks Computer & Technology sector’s growth of 10.3%. The company is benefiting from the strong Google Services segment. It is making concerted efforts to bolster this segment further on the back of strengthening Google Chrome and Android features.

These efforts are evident from Alphabet’s latest addition of a “Listen to this page” text-to-speech feature on Google Chrome for Android. The feature will open on Android’s three-dot overflow menu, tapping on which will open a sheet UI with a timeline scrubber, rewind/fast forward buttons, playback speed adjustment, highlight text & auto-scroll, and voice options.

Alphabet’s roll-out of “Minimized Custom Tabs” for Google Chrome on Android remains noteworthy. These tabs shrink webpages into Picture-in-Picture windows, enabling multitasking and seamless transition between native apps and web content.

These efforts are expected to improve the user experience and functionality of the Chrome browser. This, in turn, will continue to aid Google in capitalizing on growth opportunities present in the global search engine market, which, per a Dataintelo report, is expected to witness a CAGR of 11% between 2024 and 2032.

Moreover, growing Chrome efforts will aid Alphabet in sustaining its dominance in the global search engine market against its peers like Microsoft MSFT and Apple AAPL, which are also making concerted efforts to rival Alphabet in the same market.

Microsoft's Edge browser is gaining popularity as it offers a modern, fast and intuitive experience compared to Chrome. It uses AI and a refreshed design, offering a personalized and straightforward experience. Edge also enables secure browsing with features like Microsoft Defender SmartScreen, Password Monitor, InPrivate search, and Kids Mode. It also provides usability features like smart shopping AI pop-ups.

Apple, on the other hand, is testing an upgrade of its Safari web browser with UI tweaks, advanced content blocking, and Intelligent Search. The software, expected to launch in 2024, will feature a new user interface, a "Web eraser" feature and AI-driven content summarization tools.

Alphabet Inc. Price and Consensus

Alphabet Inc. Price and Consensus
Alphabet Inc. Price and Consensus

Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote

Other Google Services Efforts to Note

In addition to growing Chrome capabilities, Google is taking continuous strides to bolster other apps and businesses under the Google Services Segment.

Recently, Google introduced a “Lookup” reverse number shortcut feature on the Google Phone app for its Pixel devices.

Google also partnered with Peloton Interactive PTON in a bid to strengthen its YouTube business.

This partnership marks a significant step for Google to expand its YouTube TV subscriber base, as it requires Peloton All-Access members to have a YouTube TV subscription in order to watch content while on their machine.

Google introduced a new Notifications feature for one of its Android apps, Google Wallet, in a bid to boost its app offerings.

Strengthening Google Services segment is expected to continue aiding Alphabet’s overall financial performance in the near term.

The Zacks Consensus Estimate for 2024 total revenues stands at $295.53 billion, indicating year-over-year growth of 15.2%.

The consensus mark for 2024 earnings is pegged at $7.60 per share, indicating a 31.03% rise from the year-ago figure. The figure has been revised upward by 0.5% in the past 30 days.

Conclusion

We believe that Alphabet’s strength in the Google Services segment on the back of Chrome, YouTube and Android app upgrades as well as its robust cloud division powered by AI infrastructure, database and analytics, collaboration tools, cybersecurity and generative AI make Alphabet an attractive stock for investors at the current level.

Alphabet is trading at a discount with a forward 12-month P/E of 21.91X compared with the Zacks Internet Services industry’s 22.68X.

The stock sports a Zacks Rank #1 (Strong Buy) with a Growth Score of B, a combination that offers a good investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.

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