Should you buy Alphabet stock? GOOG/GOOGL
Join 9000+ investors: https://www.overlookedalpha.com
About 6 months ago, Alphabet reported a sharp increase in operating expenses and a decline in advertising revenue. Some investors worried that ChatGPT was going to be a Google killer and the stock had fallen to under $100 a share.
That fear was put to bed last week as the company reported a 7% increase in revenue, a 15% increase in net income and operating margins of 29%.
The stock has now recovered by one third giving the company a market cap of 1.67 trillion dollars. With almost $118 billion of cash and investments and 14 billion of long term debt, the enterprise value is roughly 1.57 trillion.
That makes Alphabet one of the largest companies in the world and its easy to see why. The company generated 290 billion dollars of revenue over the last 12 months, including 61 billion of net income and 71 billion of free cash flow. Earnings per share has grown 18% a year over the last 10 years. Even so, Alphabet stock is not particularly expensive, it’s valued at 26 times earnings and 22 times free cash flow.
Looking at the individual segments, Google search revenue increased 5% to 42.6 billion, YouTube ads increased 4.4% to 7.7 billion and Google cloud revenue increased 28% to 8 billion. Google network dropped 5% but Google other which includes hardware and subscriptions rose 24% to 8.1 billion. And the company also bought back 15 billion dollars worth of stock.
#googstock #investing #stockstobuy #overlookedalpha
Join 9000+ investors: https://www.overlookedalpha.com
About 6 months ago, Alphabet reported a sharp increase in operating expenses and a decline in advertising revenue. Some investors worried that ChatGPT was going to be a Google killer and the stock had fallen to under $100 a share.
That fear was put to bed last week as the company reported a 7% increase in revenue, a 15% increase in net income and operating margins of 29%.
The stock has now recovered by one third giving the company a market cap of 1.67 trillion dollars. With almost $118 billion of cash and investments and 14 billion of long term debt, the enterprise value is roughly 1.57 trillion.
That makes Alphabet one of the largest companies in the world and its easy to see why. The company generated 290 billion dollars of revenue over the last 12 months, including 61 billion of net income and 71 billion of free cash flow. Earnings per share has grown 18% a year over the last 10 years. Even so, Alphabet stock is not particularly expensive, it’s valued at 26 times earnings and 22 times free cash flow.
Looking at the individual segments, Google search revenue increased 5% to 42.6 billion, YouTube ads increased 4.4% to 7.7 billion and Google cloud revenue increased 28% to 8 billion. Google network dropped 5% but Google other which includes hardware and subscriptions rose 24% to 8.1 billion. And the company also bought back 15 billion dollars worth of stock.
#googstock #investing #stockstobuy #overlookedalpha
Category
🗞
NewsTranscript
00:00 About six months ago Alphabet reported a sharp increase in operating expenses and a decline
00:05 in advertising revenue. Some investors worried that ChatGPT was going to be a Google killer
00:11 and the stock had fallen to under $100 a share. That fear was put to bed last week as the
00:16 company reported a 7% increase in revenue, a 15% increase in net income and operating
00:22 margins of 29%. The stock has now recovered by one third giving the company a market cap
00:27 of $1.67 trillion. With almost $118 billion of cash and investments and $14 billion of
00:33 long term debt, the enterprise value is roughly $1.57 trillion. That makes Alphabet one of
00:38 the largest companies in the world and it's easy to see why. The company generated $290
00:44 billion of revenue over the last 12 months, including $61 billion of net income and $71
00:50 billion of free cash flow. Earnings per share has grown 18% a year over the last 10 years.
00:56 Even so, Alphabet's stock is not particularly expensive. It's valued at 26 times earnings
01:01 and 22 times free cash flow. Looking at the individual segments, Google Search revenue
01:06 increased 5% to $42.6 billion in Q2. YouTube ads increased 4.4% to $7.7 billion and Google
01:14 Cloud revenue increased 28% to $8 billion. Google Network dropped 5% but Google Other
01:20 which includes hardware and subscriptions rose 24% to $8.1 billion and the company also
01:26 bought back $15 billion worth of stock. Although results at Alphabet look steady, some believe
01:32 it's only a matter of time before the company starts to weaken. YouTube and Google Search
01:36 are becoming increasingly populated with ads, degrading the user experience and Google CEO
01:42 Sundar Pichai has been criticised for slow decision making and an aversion to risk. But
01:48 look below the surface and it's clear that Alphabet is a diverse company, made up of
01:52 both highly profitable businesses and riskier ventures. YouTube gets more streaming hours
01:57 than Netflix, Google Cloud is growing fast, 6 products have more than a billion users.
02:02 In addition, the company has lots of high potential investments in AI, robotics and
02:07 self-driving and more. Let's assume that Alphabet can grow revenue at 10% a year for
02:13 the next 10 years, then operate with a net income margin similar to what it is now around
02:18 20%. That would put net income at $150 billion in 10 years time. Applying a 25 times multiple
02:24 gets the valuation to $3.75 trillion and that works out to an investment return of 9.1%
02:31 a year. So Alphabet looks pretty fairly valued here but it does have the optionality from
02:36 those riskier ventures like Waymo. For now I continue to give the stock a bullish rating
02:42 but these are my personal opinions not financial advice and I do hold shares in Alphabet. For
02:47 more detailed investing ideas make sure to visit our website, overlookedalpha.com