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Stock Analyst Update

New CEO to Steer the Wide-Moat Alphabet Ship

We recommend waiting for a pullback before taking a new long position in the stock.

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Alphabet announced Sundar Pichai, current CEO of the holding company’s Google, will now also serve as CEO of Alphabet (GOOG)/(GOOGL), as the two founders of Google, Larry Page and Sergey Brin, relinquished their respective Alphabet CEO and President roles to Pichai. In our view, such a change will not impact the firm’s operations nor its strategy. Page has not been very involved in the company’s operations, and under the leadership of Pichai and Ruth Porat, Google (which brings in nearly all of Alphabet’s revenue) has continued to operate well. As stated in the letter submitted today by Page and Brin, the two will remain on Alphabet’s board and will continue to advise Pichai and his team. Overall, we agree with Pichai’s statement that this change in leadership “won’t affect the Alphabet structure or the work [the firm does] day to day.”

Our opinion on and projections for wide-moat Alphabet have not changed, and we continue to expect the firm to remain the leader in online advertising, while further monetizing its other apps such as YouTube and Google Maps, and gaining ground in the cloud market. In addition, Other Bets’ Verily and Waymo could represent attractive call options. The stock has climbed 16% during the last 12 months (compared with 14.5% and 11% increases in NASDAQ and the S&P 500, respectively) and is now a 3-star stock, trading near our $1,300 fair value estimate. We recommend waiting for a pullback before taking a new long position in the stock.

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Ali Mogharabi does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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