‘Don't Overlook the Innovation Story,' Says Colin Sebastian About Alphabet Stock

Business Insider

29-05-2025

Alphabet (NASDAQ:GOOGL) has long been the undisputed leader in internet search, but the rise of generative AI is beginning to raise questions about its continued dominance in the field.
Confident Investing Starts Here:
Against this backdrop, Baird's Colin Sebastian, an analyst ranked in the top 4% of Wall Street stock experts, attended the company's Google Marketing Live event and came away convinced that Alphabet is taking decisive steps to stay ahead of the curve.
'While there were 'breadcrumbs' that foreshadowed key announcements at Google Marketing Live, it's encouraging to witness the company innovating quickly in search, showing a commitment to monetization, and even taking aim at competitors in new ways,' the 5-star analyst said. 'While competition in search is intensifying, Google presented, in our view, a compelling suite of new ad products and agentic capabilities that can expand monetization and contribute incrementally to revenues.'
Google announced a deeper integration of AI into its core search advertising platform, including the expansion of ad placements within AI Overviews (AIO). This means that both search and shopping ads will now appear directly in AI-generated summaries on desktop browsers in the U.S. Additionally, the company is introducing ad formats specifically designed for AI Mode, tailored to fit the more conversational and context-aware nature of AI-powered search experiences.
'Importantly,' adds Sebastian, 'these newer formats should help expand search advertising and reach into middle- and upper-funnel consumer journeys, directly contradicting the bearish view that new AI formats will simply disintermediate core search.'
Sebastian thinks that advertisers will be quick to adopt these new ad formats, especially as Google has indicated that monetization tests are performing similarly to traditional search ads. Over time, the analyst believes these formats could lead to higher conversion rates for commerce and retail advertisers. In addition, advertisers running Performance Max and shopping campaigns will be able to access the new formats effortlessly. For users, the key will be Google's ability to match relevant ads with the context of longer, more detailed search queries, allowing users to find answers, including ad content, directly within the AI search experience without needing to scroll to traditional website links. As is typical for Google, the company is also introducing enhanced measurement and analytics tools, including new agentic capabilities to help marketers streamline and automate tasks.
'While many investors remain skeptical in our conversations,' notes Sebastian, 'Google also continues to report growth in queries where AI Overviews are shown, and Gen-Zers are the most active search cohorts.'
So, what's the bottom line for investors? Sebastian is backing Alphabet shares with an Outperform (i.e., Buy) rating and a $190 price target, implying a potential upside of 10% over the next year. (To watch Sebastian's track record, click here)
Wall Street at large is also bullish. GOOGL carries a Strong Buy consensus rating, based on 29 Buy recommendations and 9 Holds. The average price target stands slightly higher at $199.14, suggesting the stock could climb ~15% in the coming months. (See GOOGL stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a tool that unites all of TipRanks' equity insights.