Investing.com – With the appointment of a new CFO, Google (NASDAQ:) has reached a pivotal moment where it can enhance communication and transparency with investors, thereby boosting confidence and improving its market multiples.
Morgan Stanley analysts point out that some of the targeted initiatives undertaken by the new CFO could go a long way in clarifying Google’s growth story and boosting its value.
By focusing on key areas like GenAI disclosure, financial guidance, business segment clarity, and public relations, Google has the opportunity to reshape its narrative and encourage more positive investor sentiment.
One key step Google’s new CFO could take is to increase transparency around its generative artificial intelligence (GenAI) initiatives.
As AI becomes increasingly integrated into Google’s ecosystem, providing more detailed insights into the performance of these technologies could significantly improve investor confidence.
While Google has already started sharing some details, there is a strong case for more quantitative and qualitative disclosures that provide a deeper understanding of how these innovations drive revenue and engagement.
For example, Morgan Stanley points to how Meta (NASDAQ:) has been successful in providing detailed reporting on engagement metrics for its Reels and AI products.
Such disclosures have helped the market better understand the ROI of Meta’s investments, providing a framework that could work equally well for Google.
By providing clearer data on how GenAI is impacting user behavior and revenue growth, Google can give investors the information they need to better evaluate the long-term potential of these innovations, which could boost confidence in Google’s growth story.
Equally important is consistent and clear guidance on Google’s financial outlook, particularly around capex, opex, and revenue.
Faced with massive investment in AI, Google’s lack of clarity about its spending plans has contributed to market uncertainty. While some rivals, such as Amazon (NASDAQ:) and Microsoft (NASDAQ:) provide detailed quarterly updates that help investors anticipate financial volatility, Google has so far provided relatively vague forecasts.
For example, Google’s statement that “the risk of underinvesting is significantly greater than the risk of overinvesting” left a wide range of future capital spending expectations, making it difficult for investors to model free cash flow and earnings trajectories.
By tightening its forward guidance — perhaps by providing more explicit capital spending ranges or tweaking operating spending — Google could give the market a more stable view of its financial future. Consistent upward revisions to this guidance would also signal a well-run and growing business, leading to improved investor confidence and the potential for multiple expansion.
Another crucial area where Google can boost investor visibility is in its business segment reports, particularly for YouTube and Google Cloud.
These are key areas for growth, but the current level of disclosure around them leaves a lot to be desired.
For example, YouTube is a platform that generates significant revenue from advertising and subscriptions, but Google’s current reporting on it tends to underestimate its full potential.
Analysts at Morgan Stanley believe that separating YouTube’s advertising and subscription revenue, and providing more detailed insights into its profitability, would allow investors to better model and value the platform — especially compared to other video streaming players like Netflix (NASDAQ:).
Similarly, within the Google Cloud segment, a clear distinction between Google Cloud Platform (GCP) and Workspace would give investors a better understanding of how Google competes with AWS and Microsoft Azure.
Since cloud services are a critical growth engine for Google, providing more detailed disclosures here could significantly improve how investors perceive Google’s competitive position and growth potential.
Google’s new CFO could help control public discourse by emphasizing the positive societal impacts of the company’s products and services.
At a time when regulatory pressures and legal challenges are mounting, shifting the conversation toward the benefits Google provides to users, businesses, and society as a whole can help counter some of the negative sentiment.
Google products, like Maps and Translate, and its contributions to small businesses and developers are important, but often underestimated in the broader narrative.
As Morgan Stanley points out, Amazon has been successful in highlighting its community contributions, such as job creation and community investment, which has helped boost its public image.
Google could benefit from a similar approach by more actively communicating how its products positively impact billions of people around the world, from providing free mapping services to enabling life-saving medical translations.
Such efforts can not only enhance its reputation, but also contribute to higher market multiples by aligning investor sentiment with the company’s broader value to society.
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