Google, a subsidiary of Alphabet Inc (NASDAQ:GOOGL), may sell generate $3.8 billion in revenue by selling more than 5 million Pixel smartphones in 2017, according to Morgan Stanley.
In a research note to clients, the firm’s analyst Brian Nowak wrote that the search engine giant is estimated to sell 5.5 million Pixel phones in 2017. He also expects the company to sell 3 million units in the last three months of 2016, generating $2 billion.
Nowak estimates that Pixel phone, Google’s expanded text ads, a fourth mobile ad unit, and Maps will generate $6.5 billion in revenues for the company in 2017.
“Bigger picture, we believe the Pixel is important as [Alphabet] works to provide users a more integrated and consistent Android experience aimed to improve Android user mobile search monetization,” Nowak wrote.
Google introduced the Pixel smartphone in early October. The smartphone, which runs Android Nougat 7.1 operating system, is the first phone made by Google inside and out.
Available in two sizes, a 5-inch model or a 5.5-inch model, the phone costs between $649 and $869. It comes in three colors: very silver, quite black and really blue.
Nowak noted that the Pixel is one of several factors setting Google up for a “great” 2017.
The Pixel features Google Assistant, the built-in customer support service, unlimited and free backup of full-res photos and videos, and Smart Storage. Google Assistant is designed to compete with Apple’s Siri, Microsoft’s Cortana, and Amazon’s Alexa.
Pixel Could Give Alphabet Sales Boost that Wall Street Not Expecting
Nowak wrote that Google will profit from the Pixel beyond sales of the phone itself, according to a report from Business Insider.
People spend three times more money on Apple Apps Store than they do Android ones. The analyst believes that the Pixel could close this gap due to some of its features.
“We see Pixel’s unique artificial intelligence capabilities, deeper app integration, improved computing power and platform, and new hardware capabilities leading to higher Android user monetization (increased spend on smartphones) and higher mobile search monetization (as advertisers will spend more as users monetize higher),” Nowak writes.
A report from Barron’s suggests that the Pixel estimated sales, which will be fraction of expected iPhones sales next year, could still give Alphabet Inc (NASDAQ:GOOGL) a sales boost that Wall Street isn’t expecting.
“Even if Alphabet doesn’t catch up to Apple in terms of how many units it ships, the Pixel could pay off big as users spend more money on their smartphones, and Google finds more ways to take a cut,” the Barron’s article reads.
Moreover, Nowak believes that Alphabet stock will outperform in 2017. “Google’s share price is essentially flat in 2016 … vs. the average internet name up 15% and the S&P 500 up 8%,” Nowak noted. The analyst expects that the company’s stock will rose to $950 from a recent $789 next year.
Earlier, a report from The Motley Fool suggested that Google Maps could be become the next big growth driver of Google’s ad revenue.
Analysts at Baird believe that Google Maps will generate $5 billion in revenue for the search company by 2020. Maps are expected to be the next big product after YouTube, from where a growing percentage of the company’s revenue is coming from.