Here’s why Credit Suisse sees a 30% upside in Alphabet stock

Mad Money host Jim Cramer said on Friday, “you have to own some big tech stocks”, and the brokerages seem to agree. After Citi’s big bump in its price target on Microsoft last night, Credit Suisse said on Friday it sees an about 30% upside in Google-parent Alphabet Inc (NASDAQ: GOOGL).

Alphabet stock jumped more than 2% on the news this morning to hit a record high of almost $2,633 per share. The tech giant is scheduled to publish its quarterly results next week.

Analyst Stephen Ju reiterates his outperform rating on GOOGL

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Analysts at Credit Suisse are particularly confident of consistent innovations in Alphabet’s advertising business. On Friday, analyst Stephen Ju reiterated his ‘outperform’ rating on GOOGL with a price target of $3,350 per share that represents an about 30% upside.

According to Ju, Alphabet isn’t only targeting large companies but also small-to-medium sized businesses with its new product launches – a move that can potentially grow its total addressable ad market to a whopping $3 trillion; more than sufficient to keep investors interested in the stock.  

Alphabet’s traffic acquisition costs to climb this year

Credit Suisse forecasts YouTube to note a year-over-year growth of 41% in revenue this year, leading to a 30% annualised increase in revenue from Google’s ad business as a whole. Traffic acquisition costs, however, are expected to climb in 2021 partly due to more lucrative payments to content creators on YouTube.

“Given Google’s global footprint, it is worth noting that nearly all advertising sectors are on pace to exceed our expectations for the quarter. And while overall ad budget recovery propelled recent results, we cast our eyes forward to the more important product-driven and durable contributors to ad volume and pricing growth for 2H21 and beyond,” Ju added.