Google stock seen as ’top mega cap pick’ in break-up scenario

Investing.com -- Alphabet could unlock significant shareholder value through a full corporate break-up, with Google Cloud alone estimated to be worth $56 per share, D.A. Davidson said in a Wednesday note.

While maintaining a Neutral rating on Alphabet, the broker argues that it "would see GOOGL as the top mega cap pick if it proceeded with a complete break-up."

The note is part of a broader series advocating for the disaggregation of Alphabet’s (NASDAQ:GOOGL) business lines.

The latest report focuses on Google Cloud Platform (GCP), which is positioned as a potential standout among software stocks. D.A. Davidson believes the platform combines features of Microsoft (NASDAQ:MSFT), Snowflake (NYSE:SNOW), CrowdStrike Holdings (NASDAQ:CRWD), Cloudflare Inc (NYSE:NET), and Nebius Group (NASDAQ:NBIS), and expects it to generate $55 billion in revenue this year.

“GCP is not only a top 3 hyperscaler expected to generate $ 55bn of revenue this year, but provides a full suite of tools around that core offering that is competitive with the two leaders Amazon (NASDAQ:AMZN) AWS and Microsoft Azure,” analyst Gil Luria wrote.

He highlights GCP’s ability to leverage Tensor Processing Unit (TPU) – Google’s custom-designed AI chip – and Nvidia (NASDAQ:NVDA) architectures as a cost advantage in AI and cloud workloads.

Luria also notes strong developer activity on GCP during the first half of 2025, despite some seasonal weakness in June. Services like Compute Engine, Vertex (NASDAQ:VRTX), BigQuery, and Cloud Storage were among the better performers.

A potential acquisition of cloud security firm Wiz could further bolster GCP’s competitiveness in security, an area where Microsoft traditionally holds the edge.

D.A. Davidson’s valuation argument rests on GCP trading at a 16x revenue multiple, implying a $682 billion market cap.

This adds to a broader sum-of-the-parts analysis valuing Alphabet at around $312 per share in a full breakup scenario, including the contribution from TPU and Google DeepMind.

Despite this upside potential, D.A. Davidson keeps its 12-month price target for Alphabet at $160, citing the uncertainty of whether the company will pursue structural changes.