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If rumors are to be believed, Alphabet Inc.’s (GOOGL - Free Report) Google is already working on Google Pixel 2, its next smartphone offering. The buzz is that the new phone will sport a slimmer body, powerful camera and hardware, and stay “premium”.

Google Pixel was released last October, and has gone on to become one of the most popular and exciting smartphones. The phone is a big hit among media and consumers.

Google Pixel comes at a premium price and targets high-end consumers. This puts Google in direct competition with Apple (AAPL - Free Report) and Samsung’s high end offerings.

The flagship fight is already intense among Google Pixel, Samsung Galaxy S7 and iPhone 7. With speculation already building around Galaxy S8 and iPhone 8, it will not come as a surprise if Google rolls out the next generation of its pixel phone.

Alphabet’s shares appreciated 6.4% over the last six months, from the time Google Pixel was released, compared with the Zacks Internet-Services industry’s gain of 3.6%. It would be interesting to see how the new device (if launched) influences share price.

Leaks Reveal Notable Design Changes

Multiple sources have revealed that Google is working on Pixel 2, reportedly codenamed “taimen”. Considering what taimen literally means (a fish weighing over 100 kilogram) and Google’s habit of indicating device size through codenames, we can expect a massive phone with at least 6 inches display.

Renders surfacing online suggest notable differences between Pixel 2 and its predecessor. It seems that the new phone will feature narrower bezels both on top and bottom, two speaker grilles, indicating a possible inclusion of stereo speakers, separate volume buttons instead of a rocker, a redesigned glass back with chamfered edges, fingerprint sensor and center-aligned camera module.

The position of USB Type-C port at the base and 3.5 mm audio jack at the top remains unchanged.

Game Changer for Alphabet?

First, we have to wait till Google I/O in May and see if there is actually a new Pixel phone in the company’s pipeline.

In case, the rumors are found to be true, we don’t believe that the device will be anything like a game changer for Google.

To make the phone as fascinating as a game changer, the company will have to outsmart Apple and Samsung on both the software and hardware fronts at a competitive price, and that’s really hard to achieve. However, we expect the device to give tough competition to similar offerings from rivals.

Alphabet Inc. PS Ratio (TTM)

Notably, the major challenge that hovered around Google Pixel was its high price. Several reports have suggested that Pixel 2 will have a pocket-friendly companion to help the company broaden its customer base and boost sales. The rumored Pixel 2B will be priced lesser than the main device, sacrificing on some hardware power.

We also note that the initial Pixel device has a high performance 12.3 megapixel camera, but it lags the likes of Samsung Galaxy S7 in terms of pure megapixels. It has been rumored that Google with replace this camera in the new device with one that works extremely well in low light.

Google is reportedly testing a number of processors, including the latest Qualcomm Snapdragon chips and specialized Intel hardware. So, we can expect the inclusion of a powerful processor as well as more memory and storage. Reports also claim the inclusion of waterproof design for the first time.

Wrapping Up

It goes without saying that Google must do something to outsmart its rivals Samsung, Apple and Sony (SNE - Free Report) in the high range smartphone market. With an increasing focus on innovation, huge cash balance and technological prowess, Google has the flexibility to pursue growth in this area and give tight competition to the others.

Currently, Alphabet has a Zacks Rank #3 (Hold). A better-ranked stock is Autohome Inc. (ATHM - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Current quarter estimates for Autohome have risen by 20% over the last 30 days.

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