Proprietary Data Insights
Financial Pros Big Tech Searches In The Last Month
Bitcoin “Hall of Famer” Charlie Shrem just issued a new crypto recommendation… A $20 play that could be even bigger than Coinbase.
If You Could Only Buy One Tech Stock
Investors have gotten crushed in 2022.
The Nasdaq is down more than 31%, and the S&P 500 is down more than 23%.
However, it’s worth noting that the average bear market lasts 289 days.
This, too, shall pass.
If you’re a long-term investor, it’s time to dig around for cheap buys.
Forget about speculative companies that are not profitable. You want to focus on established names that make money and have plenty of cash to weather the storm.
As unpopular as it might sound, looking at big tech stocks makes sense at these levels. One of them is Alphabet (GOOG), the 3rd most searched symbol by financial pros over the last month looks like an absolute steal here.
Yes, Apple (AAPL) and Amazon (AMZN) get the most press.
But as we explain below, Google has way more going for it at the moment.
Alphabet (GOOG) is a holding company that generates most of its revenues from online advertising.
The company operates the search engine Google, which handles 3.5 billion daily searches and approximately 92% of the global search engine market.
It owns and operates YouTube, which has 2.6 billion users worldwide.
The company’s email service, Gmail, has 1.8 billion users worldwide and holds approximately 30% of the email client market share.
Other businesses include Nest Labs, a home automation specialist company, Google X, which is focused on the artificial intelligence sector, and Google services, which includes Android, Chrome, hardware, Google Drive, Google Maps, Google Photos, and Google Play.
GOOG owns and operates Google Workspace, which includes enterprise cloud-based collaboration tools. The firm is also involved in the biotech and healthcare space and is focused on treating aging and degenerative diseases.
During Q2 2022, the firm did $69.7 billion in revenues, up 13% from last year.
Shares trade under two symbols bassed on class – GOOGL, which is class A, and GOOG, which is class C.
Despite its massive size, GOOG has consistently grown its business yearly.
The firm grew its revenues from $74.9 billion in 2015 to $257.6 billion in 2021, a 243% increase in revenue growth.
Its 12-month trailing revenues are $278.1 billion. And while a lot of tech stocks are struggling to grow in this economy, Alphabet’s investments in AI and other areas have improved its efficiency and allowed it to grow.
GOOG is sitting on $125 billion in total cash and has $28.8 billion in total debt.
The company has a current ratio of 2.8x. While it can easily pay a dividend, it chooses to invest its money in the business and pay shareholders through stock buyback programs.
GOOG is cheap right now. The stock is trading at a P/E GAAP ratio of 18.3x, notably lower than its 5-year average o 33.4x.
Other than META Platforms (META) at 11.6x, it’s the cheapest big tech company. For example, Amazon(AMZN) trades at a 103x PE GAAP ratio, Microsoft (MSFT) trades at 24.6x, and Apple (AAPL) trades at 24.8x.
Plus, GOOG trades at a price-to-sales ratio of 4.7x, significantly lower than its 5-year average of 5.5x. That’s better than MSFT at 9x, AAPL at 6.3x, but not as good as META at 3.2x, and AMZN at 2.3x.
Additionally, GOOG has a price-to-cash flow ratio of 13.5x, materially lower than its 5-year average of 17.6x. The only big tech firm with a lower price-to-cash flow ratio is META at 6.45x.
GOOG has a gross profit margin of 56.7%, which is better than tech giants AAPL and AMZN. However, not as strong as META at 80.4% and MSFT at 68.4%. With inflation running wild and the cost of borrowing money increasing, cash is king.
The company generates a whopping $95 billion in cash from operations. Only AAPL has more at $118.2 billion. At a net income margin of 25.8%, only MSFT at 36.6% and META at 28.1% are doing better.
GOOG has grown revenues (YoY) to 26.2%. No other big tech firm comes close.
MSFT is second at 17.9%. Even more impressive, GOOG has an EBITDA growth (YoY) of 28.2%, no other tech giant can match that.
Our Opinion 9/10
GOOG is down more than 31% YTD. It’s trading at a discount relative to its 5-year average.
Yet, the company remains the dominant player in several categories and sits on a mountain of cash.
Google is a forward-looking company with several investments in emerging technologies like AI and machine learning.
We believe getting in at these levels is an absolute steal. While shares could dip further, we think building a position at these levels will pay off in a few years.
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