Alphabet stock analysis. GOOGL stock.
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Alphabet or Google stock climbed 11% last week after reporting Q1 earnings. The company now has a market cap of 1.48 trillion dollars. With 26 billion of cash and 14 billion of long-term debt the enterprise value is roughly 1.47 trillion.
Q1 results showed a 3% increase in revenue to 69.8 billion but there was an 8% decrease in net income.
Over the last 12 months Google has now reported 285 billion of revenue, 55.6 billion of net income and 62 billion of free cash flow. So the company is valued at 5.2 times revenue, 25 times earnings and 24 times free cash flow.
As I mentioned, Google’s earnings dropped last quarter but the stock still went up because investors were pleased with the company’s performance in Google Cloud.
Cloud is a lucrative and promising business and the 28% increase in revenue was more than recorded by Amazon’s AWS and roughly on a par with Microsoft’s Azure. Market share gains in this segment is a very positive sign.
And investors were also encouraged by the company’s progress in AI.
When OpenAI introduced ChatGPT, Alphabet stock plummeted by around 15%. But in a conference last week, Google began to take back the AI narrative when it unveiled new features for its own AI tool Bard.
Unlike ChatGPT, Bard can access images and internet links, and its training is not cut off in 2021.
.
ChatGPT is still better at certain tasks but Bard is now holding its own and it’s too early to say who is actually leading the AI race. And even if users do prefer Bard, we still don’t know how Alphabet plans to monetize that product.
Let’s consider a scenario where Alphabet grows revenue at 10% per year for the next 10 years then operates with a 20% net margin which is slightly lower than its historical average. That would see the company produce 162 billion of net income in 10 years time.
Apply a 25 times multiple to that figure gets us to a market cap of 4 trillion which works out to an investment return of 10.7% per year.
#googstock #stockstobuy #stocks #investing #stockmarket
Visit our website for more: https://www.overlookedalpha.com
Alphabet or Google stock climbed 11% last week after reporting Q1 earnings. The company now has a market cap of 1.48 trillion dollars. With 26 billion of cash and 14 billion of long-term debt the enterprise value is roughly 1.47 trillion.
Q1 results showed a 3% increase in revenue to 69.8 billion but there was an 8% decrease in net income.
Over the last 12 months Google has now reported 285 billion of revenue, 55.6 billion of net income and 62 billion of free cash flow. So the company is valued at 5.2 times revenue, 25 times earnings and 24 times free cash flow.
As I mentioned, Google’s earnings dropped last quarter but the stock still went up because investors were pleased with the company’s performance in Google Cloud.
Cloud is a lucrative and promising business and the 28% increase in revenue was more than recorded by Amazon’s AWS and roughly on a par with Microsoft’s Azure. Market share gains in this segment is a very positive sign.
And investors were also encouraged by the company’s progress in AI.
When OpenAI introduced ChatGPT, Alphabet stock plummeted by around 15%. But in a conference last week, Google began to take back the AI narrative when it unveiled new features for its own AI tool Bard.
Unlike ChatGPT, Bard can access images and internet links, and its training is not cut off in 2021.
.
ChatGPT is still better at certain tasks but Bard is now holding its own and it’s too early to say who is actually leading the AI race. And even if users do prefer Bard, we still don’t know how Alphabet plans to monetize that product.
Let’s consider a scenario where Alphabet grows revenue at 10% per year for the next 10 years then operates with a 20% net margin which is slightly lower than its historical average. That would see the company produce 162 billion of net income in 10 years time.
Apply a 25 times multiple to that figure gets us to a market cap of 4 trillion which works out to an investment return of 10.7% per year.
#googstock #stockstobuy #stocks #investing #stockmarket
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NewsTranscript
00:00 Alphabet or Google stock climbed 11% last week after reporting Q1 earnings.
00:05 The company now has a market cap of $1.48 trillion. With $26 billion of cash and $14
00:12 billion of long term debt, the enterprise value is roughly $1.47 trillion.
00:16 Q1 results showed a 3% increase in revenue to $69.8 billion,
00:21 but there was an 8% decrease in net income.
00:24 Over the last 12 months, Google has now reported $285 billion of revenue, $55.6 billion of net
00:31 income and $62 billion of free cash flow. So the company is valued at 5.2 times revenue,
00:37 25 times earnings and 24 times free cash flow.
00:40 As I mentioned, Google's earnings dropped last quarter, but the stock still went up
00:45 because investors were pleased with the company's performance in Google Cloud.
00:49 Cloud is a lucrative and promising business and the 28% increase in revenue was more than
00:54 recorded by Amazon's AWS and roughly on a par with Microsoft's Azure. Market share gains in
01:00 this segment is a very positive sign, and investors were also encouraged by the company's progress in
01:06 AI. When OpenAI introduced ChatGPT, Alphabet's stock plummeted by around 15%, but in a conference
01:14 last week, Google began to take back the AI narrative when it unveiled new features for
01:18 its own AI tool, BARD. Unlike ChatGPT, BARD can access images and its training is not cut off in
01:25 2021. ChatGPT is still better at certain tasks, but BARD is now holding its own and it's too early
01:32 to say who is actually leading the AI race. And even if users do prefer BARD, we still don't
01:38 know how Alphabet plans to monetise that product. Let's consider a scenario where Alphabet grows
01:44 revenue at 10% per year for the next 10 years, then operates with a 20% net margin, which is
01:49 slightly lower than its historical average. That would see the company produce $162 billion of net
01:55 income in 10 years time. Apply a 25 times multiple to that figure gets us to a market cap of $4
02:02 trillion, which works out to an investment return of 10.7% per year. On the one hand, Alphabet is in
02:09 an excellent position, with a monopoly in search and promising growth in Google Cloud. On the other
02:14 hand, top line revenue appears to be slowing and net income has now declined for four quarters
02:20 out of the last five. Those trends are a bit concerning and there's a chance of Microsoft
02:25 Bing taking market share. But the future of AI may become concentrated amongst just a few powerful
02:31 firms and I think Alphabet could be one of them, which is why I continue to give the stock a
02:36 bullish rating. But these are my personal opinions, not financial advice and I do have a position in
02:41 Alphabet stock. For more detailed analysis, visit our website overlookedalpha.com.