Google Inc Holds Long-Term Potential: Merrill Lynch

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Google hosted its I/O developers’ conference on May 29, following which analysts at Merrill Lynch reiterated their Buy rating with a price target of $650 on the internet giant. The analysts believe the I/O conference may not be able to drive the stock in the near term but expect Google to maintain its market share with the help of the new technology platforms and other initiatives related to the IoT.

Android, Google Now made smarter

At the event, the internet firm unveiled its new version of its operating system, Android M, and discussed the latest features such as Google Photos, Google Play, and the new platform for the Internet of Things (IoT). Android M is expected to be available by fall 2015.

Analysts at Merrill Lynch believe that, in the last few quarters, Google’s effort to make its Android platform and Google Now smarter has worked. Google Now offers more features that include comprehending the entire context of queries and enhancing the overall user experience. The analysts believe that the newly introduced features will work in favor of the internet company by differentiating Android devices in the long run. In addition, the massive capex by the company will help it gain more competitive edge in the long run.

At the event, Google also revealed the launch date for its next Nexus devices, which will be available by the end of the third fiscal quarter of this year. The analysts expect Google Play to earn net revenues of $5 billion in FY15.

Google ramping Android Pay to compete with Apple

Apart from Android M and Google Play, Google has also been ramping its payment platform, Android Pay, to overcome the threat from Apple Pay. As per the internet firm, the payment service, which will use near field communication (NFC), will be available for Android M users, thus connecting over 700,000 offline users. The analysts note that the payment platform, which will be a massive improvement over the previous Google Wallet, will work with MasterCard, Visa and Discover Cards. However, Google has not revealed any details on the integration of PayPal with the new payment feature.

Google also shared details for its Android ecosystem, which enjoys over one billion active users and 500 billion installed applications in the last 12 months. Also, the company, during its I/O conference, revealed that every eight of ten cell phones shipped last year were powered by Android. Merrill Lynch analysts expect Google to continue offering affordable smartphones to emerging markets.

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