Yahoo Finance Alphabet's (GOOGL) Pixel Efforts Boost Google Services Segment
Alphabet’s GOOGL shares have rallied 25.4% in the year-to-date period, outperforming the Zacks Computer & Technology sector’s growth of 19.4%. The company is benefiting from a strong Google Services segment, driven by search, YouTube, Android and Pixel.
Alphabet’s division, Google, is making concerted efforts to bolster the segment further.
Recently, Google introduced a “Lookup” reverse number shortcut feature on the Google Phone app for its Pixel devices. The shortcut feature, present in the Recents tab, will open Google Search with the number, including country code, placed in parentheses when users tap on it to expand an unsaved incoming call.
The company also added access to Gemini Nano through the Settings app for Pixel 8 and 8a owners, enabling features like Summarize in Pixel Recorder, Magic Compose in Google Messages and improved Gboard Smart Replies.
Alphabet is expected to gain solid traction among Pixel smartphone and smartwatch users on the back of these efforts. This, in turn, would allow Google to capitalize on growth opportunities present in the global smartphone and smartwatch markets which as per a Mordor Intelligence report, are expected to witness a CAGR of 4.1% and 27.8%, respectively, between 2024 and 2029.
Moreover, expanding Pixel offerings will aid Alphabet in narrowing down its gap with Apple AAPL, which is riding on the solid momentum of its iPhone and Apple Watch series.
Apple’s launch of Apple Intelligence, a personal intelligence system that uses generative models and personal context to provide useful and relevant intelligence, simplifying and accelerating everyday tasks, will further bolster its iPhone series.
Apple expanded its Apple Watch offerings with the introduction of watchOS 11, a new operating system for Apple Watch, which offers improved health and fitness insights, personalization and improved user experience.
Alphabet also remains well-poised to strengthen its competitive positive against Garmin GRMN in the smartwatch market.
Garmin is benefiting from its portfolio of fitness smartwatches including the Venu and vivoactive smartwatch series that boast new health and wellness features, including nap detection and enhanced sleep coaching. Its strengthening portfolio of adventure watches, which includes the tactix 7 and MARQ Carbon series, also bodes well for the company.
Alphabet Inc. Price and Consensus
Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote
Strength in Google Services Segment Aids Prospects
Alphabet has been making concerted efforts to boost its Android, search and YouTube businesses in addition to Pixel in a bid to strengthen its Google Services segment.
Recently, Google introduced a new Notifications feature for one of its Android apps, Google Wallet. The Wallet app now has six notification categories, namely Tips, Purchases, Passes, Transit, Updates & Alerts, and Promotional Campaigns, allowing users to receive transaction notifications from Google Wallet directly instead of Google Play services.
Alphabet also added generative AI capabilities to boost its search business. With Search Generative Experience, users can get AI-powered overviews for search queries, enabling a wider range of information needs and providing more links to diverse sources on the results page.
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.
These efforts are expected to benefit the Google Services segment’s performance in the upcoming period.
The strengthening Google Services segment is expected to aid 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 0.4% in the past 30 days.
Conclusion
Strength in the Google Services Segment, along with its robust cloud division, and integration of generative AI capabilities into its offerings, 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 22.07X compared with the Zacks Internet Services industry’s 22.87X.
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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