• by Laurie Sullivan  @lauriesullivan, January 7, 2020

Marketers and agency reps have a positive outlook for Alphabet and its services under the guidance of Sundar Pichai. Now at least one analyst does too.

“This change in the guard offers the most [options] for multiple expansion for the stock we have seen in years,” wrote Michael Levine, senior research analyst at Pivotal Research Group, in a research note published Monday. 

The firm upgraded shares of Google’s parent company Alphabet from hold to buy, raising the stock target price of $1,650 per share -- up from Friday’s closing price of $1,361.52 per share.

Several factors led to the decision to hike the stock price. For starters, Levine believes the stock will outperform other large-cap Internet stocks in 2020 as estimates move higher based on the company being “incrementally more constructive about what we perceive as multiple ways to get paid under the recently anointed Pichai regime.”

Levine also pointed to positive feedback about the Google offering under Cloud CEO Thomas Kurian, and explains how he is “encouraged by the durability of revenue growth despite no real contribution from Google Discover ads that we thought could be the needle moving in 2H19 and arguably still could be in 2020.”

While Google is not without risk based on the legacy DoubleClick ad-tech stack and the economics of the GooglePlay store, per Levine, Sundar will work hard to improve revenue for Google and Alphabet.

Sundar’s compensation is tied to the stock’s performance relative to the S&P 100 between 2020 and 2022 in two separate $45 million targets. On December 20, 2019 Pichai's stock and compensation agreement was filed with the U.S. Securities and Exchange Commission.

“We are not minimizing the regulatory risk, but DoubleClick/ad-tech stack revenues are predominantly related to GOOG networks,” Levine wrote. “Net of TAC only Network revenues only represent 7.5% of net revenues. To the extent the government pursues an anti-trust case, we think GOOG would be well served to offer up some easy concessions such as allowing YouTube inventory to be purchased programmatically by other 3rd parties like the Trade Desk vs requiring advertisers to use GOOG’s own DV360 product.”

Levine also estimates that Google Play revenue hit between $11 billion and $11.5 billion in 2019, and will grow much slower now than either overall total revenues or "Other Revenues" where it is recognized along with Google Cloud Platform and hardware.