It seems like Google’s recent behavior is quite out of character for the tech giant. Traditionally, Google has been known for its relaxed approach to pleasing investors, often providing minimal guidance on earnings calls and maintaining a somewhat enigmatic demeanor. However, according to Bernstein analyst Mark Shmulik, Google’s recent actions suggest a departure from its usual modus operandi.
Shmulik compares Google’s recent behavior to that of a bodybuilder who, after being criticized for having only superficial muscles, starts picking fights and getting into trouble. In response to peer criticism about its slow product shipping, Google has accelerated its pace of product releases, which is quite unusual for the company.
Unfortunately, this change in approach has resulted in what Shmulik describes as a series of “embarrassing misfires,” ranging from the failed Bard Paris launch in February to more recent instances of bias found in Google’s Gemini update. These missteps have led to the withdrawal of the Gemini image generator feature.
Overall, it appears that Google’s recent actions have raised questions about the company’s stability and strategic direction, prompting speculation about whether the tech giant is facing internal challenges or undergoing a significant shift in its corporate culture.
While recent events may have raised questions about Google’s future, Bernstein analyst Mark Shmulik believes it’s premature to declare the end of an era for the tech giant. Shmulik argues that the greatest risk to Google’s search dominance lies outside of the realm of artificial intelligence (AI), particularly in vertical and social search.
Despite the emergence of AI-powered tools like ChatGPT, their engagement growth has plateaued, and competitors like Microsoft’s Bing have faced challenges in gaining search revenue share. Moreover, recent incidents of human bias in Google’s Gemini update may raise doubts about the reliability of AI-driven search, potentially slowing down the adoption of next-generation AI search technology.
However, Shmulik believes that Google will address these issues and be prepared for the widespread adoption of AI-driven search in the future. Until then, he maintains a Market-Perform (Neutral) rating on Google’s stock with a price target of $160, implying a modest upside potential of 16.5% from current levels.
Despite Shmulik’s cautious stance, the broader analyst sentiment on Google remains bullish, with 29 analysts rating the stock as a Strong Buy. The average price target of $164.59 suggests a potential upside of approximately 20% over the next 12 months.
In summary, while there may be some uncertainties surrounding Google’s future direction, many analysts see significant upside potential for the stock, making it an attractive investment opportunity for those willing to wait for potential resolution of current challenges.