Google Inc (NASDAQ:GOOG) is more directly taking on Amazon Web Services with its new Compute Engine, and Baird analysts have raised their price target for the company as a result. They like the stronger “commitment to cloud services” which is implied in the offering.
Google PT raised to $1,175
Baird analysts Colin Sebastian and Rohit Kulkarni reiterated their Outperform rating and increased their price target for Google Inc (NASDAQ:GOOG) from $1,000 per share to $1,175 per share. The search giant revealed that its Compute Engine service has been rolled out to “general availability,” thus increasing its move into infrastructure-as-a-service.
Sebastian and Kulkarni believe Google is in a good position to become “the next large player in cloud services” as it competes for an even bigger share of information technology spending. Their price target increase is based on this expansion plus “positive” data points about holiday ecommerce.
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Google increases competition with Amazon
The full rollout of Compute Engine puts Google more squarely against Amazon.com, Inc. (NASDAQ:AMZN). The service enables developers to run their own apps on top of the infrastructure provided by Google. The company says it now has more than 1,000 engineers working on its cloud platform. It also promises more than 99.95% uptime and round-the-clock support.
The Baird analysts believe Google Inc (NASDAQ:GOOG) has the biggest cloud computing infrastructure with unique scale and leverage to its services. They’re estimating that the company’s cloud platform generates around $1 billion in annual revenues and is growing rapidly. In future years, they estimate that cloud services will generate $10 billion in incremental revenues for Google, which would make them a bigger piece of the pie than YouTube.
Google lowers prices
Along with the full rollout of Compute Engine, Google Inc (NASDAQ:GOOG) also said it was cutting prices by 10% for standard instance use and 50% for “persistent disk storage.” The company is also working on even more powerful instances of up to 16 cores and 104 GB of RAM, plus expanded support for operating systems.