In$Alphabet-A (GOOGL.US)$After raising the Quote and announcing the acquisition of the cloud security startup Wiz for 32 billion dollars, Goldman Sachs and UBS Group released Research Reports to comment on the Trade. According to the Research Reports, Goldman Sachs reaffirmed a "Buy" rating with a Target Price of 220 dollars. UBS Group maintained a "Neutral" rating and provided a Target Price of 209 dollars. The Target Prices given by both investment banks are higher than Alphabet-A's previous historical high of 206 dollars.

Google's parent company Alphabet and Wiz announced the signing of a final agreement, where Alphabet will acquire Wiz for 32 billion dollars in an all-cash Trade (expected to be completed in 2026, subject to standard closing conditions including regulatory approval), which is 40% higher than the previously reported 23 billion dollars.

Through this Trade, Alphabet stated that its goals are: a) to provide a unified security platform for all customers, combining Wiz's cloud security platform with Google's security operations; b) to support cybersecurity teams by utilizing AI agents and Mandiant's expertise; c) to reduce customers' cybersecurity costs; d) to prevent new threats and vulnerabilities arising from advancements in AI; e) to increase the adoption of security for multi-cloud environments.

In previous meetings and public Earnings Reports conference calls, Alphabet's CEO Sundar Pichai and Google Cloud CEO Thomas Kurian both stated that these are key strategic focus areas for Google Cloud. Before the Trade is completed, Wiz will remain an independent company, and after the Trade is completed, Wiz's performance will be reported as part of the Google Cloud division. Wiz will continue to operate openly (and cooperate with other leading cloud platforms), and both Google Cloud and Wiz have reiterated their commitment to industry standards and the open-source Community.

Goldman Sachs still believes that Alphabet is well-positioned in the current (mixed desktop and mobile applications) and future potential computing fields (AI/machine learning, personalization, and reducing friction between applications). Goldman Sachs continues to advocate that, in the long term, the combination of large-scale application (integrating more than 1 billion user applications) and computing scale for investment and efficiency improvement remains an underestimated dual narrative of AI, especially when transitioning from AI monetization 'infrastructure' to the 'platform' and 'application' layers.

Goldman Sachs pointed out that Google's current stock price is 17 times its expected GAAP EPS for 2026, with an EV/FCF of 21 times, and there is currently 45 billion dollars remaining in the stock buyback authorization (as of December 31, 2024).

Secondly, UBS Group pointed out that Google's bid is 2.7 times Wiz's last valuation of $12 billion in May 2024. Therefore, the transaction price is 32 times Wiz's expected ARR for 2025 (approximately $1 billion), indicating a higher premium compared to the trading multiples of 10-20 times for Wiz's publicly competing rivals.

Similar to the deal with Mandiant, this highlights Google's incremental investment vectors, but UBS Group believes investors will return to broader questions surrounding generative AI—capital return on investment (ROIC), unresolved regulatory issues, and the prospect of significant franchise market share loss.

Will the Mandiant deal serve as a reference precedent? Considering the overall amount, UBS Group clearly believes that Google is taking potential synergies into account — a key vector may come from the integration of Wiz with Google's SecOps products, which can help better align with the platform expansion efforts and enhance cross-selling capabilities.$CrowdStrike (CRWD.US)$and$Palo Alto Networks (PANW.US)$The deal with Mandiant provides some clues; Google previously disclosed that over a period of six quarters ending in the third quarter of 2024, which is about two years after the deal was completed, it drove a fourfold increase in Mandiant's customer adoption rate. This is because Google was able to drive a similar upward direction in Wiz's products. This may lead to lower transaction multiples, more in line with external transaction multiples in the cybersecurity industry.

UBS Group sees that the capability surrounding security data/analytics is becoming increasingly influential in impacting customers' platform purchasing decisions; because while it is still too early, having a deep security analytics stack and adding more tightly integrated cloud security tools should provide vendors with more options to leverage advancements in AI, which many believe can significantly automate security operations over a longer period. Wiz's revenue has grown fivefold in five years, having customers from 50% of the Fortune 100, making it likely to gain significant business on GCP competing platforms.

Google/Wiz pointed out that Wiz's products will continue to run and be offered on the cloud platforms of $Amazon (AMZN.US)$AWS,$Microsoft (MSFT.US)$Azure and$Oracle (ORCL.US)$ UBS Group believes this is a positive factor for customer retention. Especially in the era of AI, UBS Group has already seen customers becoming more accustomed to cloud interoperability.

This Trade is expected to be completed by 2026, after which Wiz will become part of Google Cloud. Additionally, Google management also noted that its capital allocation policy has not changed. Therefore, UBS Group does not change its valuation. Based on a 21 times multiple of the expected diluted EPS of $10.21 for 2026 GAAP, UBS Group maintains a Target Price of $209 for Google.

Editor/danial