Title: Search dominance shaken, anti-monopoly storm intensifies: Why Citigroup and Morgan Stanley still bullish on Alphabet Inc. Class C (GOOGL.US)?

Recently, Citigroup and Morgan Stanley respectively released research reports on Alphabet Inc. Class C (GOOGL.US). Citigroup maintained a "buy" rating on Alphabet Inc. Class C (GOOGL.US) with a target price of $200, stating that the company's product ecosystem advantage and AI technology innovation will drive continued growth in its search business. Additionally, Morgan Stanley also gave Alphabet Inc. Class C a "hold" rating with a target price of $185, believing that the current valuation reflects market concerns about its business and presents an opportunity for upward revaluation. Morgan Stanley believes that as of May 7, 2025, the stock price of Alphabet Inc. Class C was $151.38, corresponding to a forward P/E ratio of 15x based on expected earnings per share (EPS) of 10 in 2026, which is close to the bottom level in 2022. Based on this, Morgan Stanley set a target price of $185 for Alphabet Inc. Class C, representing a 22% upside from the current price. Citigroup, on the other hand, based on Alphabet Inc. Class C's 2026 GAAP EPS of $10.11, gave it a P/E ratio of 20x, resulting in a target price of $200, representing a 32% upside from the current price. Citigroup also highlighted Alphabet Inc. Class C's strong ecological barrier built around its products with over 500 million monthly active users, further strengthening its confidence in the company's future performance. In terms of financials, Citigroup expects steady revenue and EPS growth for Alphabet Inc. Class C from 2024-2027. Revenue expectations for each quarter in 2025 are $33.088 billion, $10.347 billion, $11.353 billion, and $11.988 billion, with EPS expectations of $2.81, $2.14, $2.21, and $2.43 respectively. Full year revenue growth is forecasted at around 9% in 2026, with a GAAP EPS operating profit margin of around 30%, giving a 20x P/E valuation and a target price of $200. On the other hand, Morgan Stanley expects operating profits for Alphabet Inc. Class C to be $127.605 billion, $141.125 billion, and $157.231 billion in 2025, 2026, and 2027 respectively, with net profits of $132.406 billion, $145.725 billion, and $161.131 billion, and EPS of $10.79, $10.34, and $10.94 respectively. Based on a 10.9x EV/NTM EBITDA valuation, Morgan Stanley gives a target price of $185. In terms of competitive advantage, Morgan Stanley points out that despite competition and macro pressures, Alphabet Inc. Class C is expected to maintain growth in search advertising revenue due to its scale and advantages. Its advertising project AdWords brings in the company's main revenue through an auction model. Citigroup emphasizes that Alphabet Inc. Class C's 15 products with over 500 million monthly active users and 7 products with over 2 billion monthly active users continue to attract users to its search services. Additionally, Alphabet Inc. Class C's investments and innovations in AI, such as Gemini 2.5 and Al Mode extension, have improved user experience and ad relevance. However, Alphabet Inc. Class C still faces many risks and challenges. For example, actions from competitors like Apple Inc. in the search field, as well as the emergence of new AI products like ChatGPT, pose potential threats to Alphabet Inc. Class C's search business. According to Citigroup data, in April 2025, Alphabet Inc. Class C's search share in Safari browsers declined, with a global search market share decrease of 120 basis points year-on-year. Apple Inc. executive Eddy Cue has stated that due to the increased usage of AI products like ChatGPT (with over 500 million weekly active users and 20 million paid subscribers), Alphabet Inc. Class C's search traffic on Safari browsers saw its first decline in over 20 years. Apple Inc. may also include other AI providers in Safari's AI search results options (although they may not become the default option), which also impacts Alphabet Inc. Class C's search business. Additionally, emerging AI search result services like OpenAI and Perplexity are quickly rising, capturing market share from Alphabet Inc. Class C and presenting unprecedented challenges. It is worth mentioning that Alphabet Inc. Class C faces multiple antitrust investigations and regulatory pressures, which may have an adverse impact on its business and financial performance. In the US, a court ruled that Alphabet Inc. Class C has an anti-competitive presence in the search market.In the case of illegal monopolistic behavior, adjustments need to be made to their business practices. In addition, Alphabet Inc. Class C is facing increased scrutiny for its monopolistic power in advertising, handling of user privacy, biases in AI products, among other issues. In Europe, governments are also increasing their scrutiny of technology companies, making the regulatory environment more complex.Finally, the uncertainty of the current economic situation may have an impact on the demand for the advertising market, which in turn could affect Alphabet Inc. Class C's advertising revenue. The advertising business is one of the main sources of revenue for Alphabet Inc. Class C, and fluctuations in the macroeconomic environment could lead to budget cuts in advertising spending by businesses, thus affecting the growth of Alphabet Inc. Class C's advertising revenue. Looking ahead, both of the above investment banks are optimistic about Alphabet Inc. Class C's layout and long-term development potential in the field of AI. Alphabet Inc. Class C's investment in AI technology will drive product and service innovation, potentially achieving breakthroughs in multiple areas such as search, advertising, and cloud services, further solidifying its market position. However, Alphabet Inc. Class C also needs to address challenges from competition, regulation, and macroeconomics in order to achieve sustainable and stable development.