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Alphabet's (GOOGL) Growing YouTube Efforts Boost Prospects

Alphabet’s GOOGL shares have rallied 26.4% in the year-to-date period, outperforming the Zacks Computer & Technology sector’s growth of 26.1%. It is benefiting from the robust performance of the Google Services segment, which is mainly driven by Search, YouTube, Android, Pixel, and its first-party web apps.

YouTube is playing a vital role in driving Google Services prospects. The company is continuously expanding YouTube capabilities thereby enhancing user experience

Per a 9to5Google report, Alphabet introduced a redesign for YouTube Music on the web. This redesign features a dual-column layout with album information displayed on the left and songs displayed on the right. It also adds a blurred background for a lively experience.

Google also bolstered its YouTube Music capabilities with the addition of a new feature that remembers the last played song and allows quick playback. This quality-of-life change retains the docked player and Up Next queue for albums and playlists, allowing immediate playback.

Partnerships are playing a key role in expanding YouTube Music’s adoption rate. Alphabet recently collaborated with Garmin GRMN to expand its reach to more platforms.

The YouTube Music app is now available on Garmin IQ Connect smartwatches. The app experience is similar to Wear OS watches, with users able to search their library for music and podcasts and a slick playing page with physical buttons for play, pause, and skip.

Growing YouTube Music efforts are helping Alphabet capitalize on solid growth opportunities present in the music streaming market, which, per a Grand View Research report, is expected to witness a CAGR of 14.4% between 2023 and 2030.

Moreover, these would also aid Alphabet in narrowing down the gap with Spotify SPOT, which holds a dominant position in the music streaming market.

Per a Statista report, Spotify retains its position as the leading player in 2023, with its market share based on subscribers being approximately 32%.

Alphabet Inc. Price and Consensus

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

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

Other YouTube Efforts to Note

In addition to YouTube Music, Alphabet is taking continuous strides to boost its overall YouTube capabilities.

This is evident from the company’s latest Cast menu redesign of the YouTube app. The updated Cast icon now features a floating bottom sheet with rounded corners, allowing users to control volume and voice search, and also provides remote control options for televisions.

Alphabet also expanded its YouTube Create video editing app for Android to 13 more countries, including Australia, Brazil, Spain, and the United States. The app simplifies short-form video creation for creators from various regions, eliminating the need for high-end computers and file transfers.

Google partnered with Peloton Interactive PTON to further 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 to watch content while on their machine.

These endeavors will continue expanding YouTube’s overall subscribers. In the first quarter of 2024, YouTube surpassed 100 million Music and Premium subscribers globally. YouTube TV recorded more than eight million paid subscribers in the same quarter.

Strength in YouTube on the back of its robust portfolio and expanding partner base will, in turn, continue aiding Alphabet’s Google Services segment performance, which is the key growth driver of the company.

In the first quarter of 2024, the Google Services segment increased 13.6% year over year to $70.4 billion, which accounted for 87.4% of the total revenues.

Conclusion

We believe Alphabet’s strength in the Google Services Segment, coupled with its robust cloud division, growing momentum across Google’s mobile search and strengthening generative AI capabilities, make it an attractive stock for investors at the current level.

The Zacks Consensus Estimate for 2024 total revenues stands at $291.26 billion, indicating year-over-year growth of 13.6%.

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 remained unchanged in the past 7 days.

Alphabet is trading at a discount with a forward 12-month P/E of 21.82X compared with the Zacks Internet Services industry’s 22.41X.

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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Garmin Ltd. (GRMN) : Free Stock Analysis Report

Alphabet Inc. (GOOGL) : Free Stock Analysis Report

Spotify Technology (SPOT) : Free Stock Analysis Report

Peloton Interactive, Inc. (PTON) : Free Stock Analysis Report

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