Morgan Stanley raised the price target for Alphabet (NASDAQ:GOOGL) to $150 from $140 and Meta Platforms (NASDAQ:META) to $350 from $300 in a note Thursday, maintaining an Overweight rating on both stocks.
MS analysts told investors that near-term fundamentals leave them bullish on both, with GOOGL "best positioned to disrupt itself," while it also trades at a 40% FCF discount to Meta.
"We expect search to fundamentally change, but change will take time, and our analysis of 3 key AI success factors still put GOOGL in the best position to disrupt/improve its own business," they said.
"Material behavior change will take time and innovation...and in the near-term, we see a path toward $7.00 of '24 EPS and a $150 PT," they added. "As discussed it is still early in AI adoption, and it will likely require new innovation and tools to further accelerate adoption. This, in our view, should help GOOGL manage the user and behavior transition and minimize near-term impacts on revenue and monetization."
On Meta, the analysts said they believe it could roll out new AI-driven tools that create new revenue streams and disrupt search.
"We fully expect META to integrate new large language models into its applications to drive new capabilities for users and advertisers, but changing behavior and material success are less certain, and online advertising doesn't have to be zero-sum," they said, warning investors not to underestimate the execution difficulty.