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Proprietary Data Insights Financial Pros’ Top Meme Value Stock Searches in the Last Month
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Google’s (GOOGL) Stock Selloff Means Opportunity
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Google parent Alphabet (GOOGL) reported some spectacular numbers amongst the deluge of earnings last week. Revenue jumped 13.6% YoY, while EPS climbed 31.7% led by strong search sales. Even the cloud business managed to see profits jump 297%, which offset losses from the company’s Other Bets. Despite all this, shares sold off with the rest of the market. This got financial pros interested in the stock, and as its price dropped, they searched it out more earnestly, according to our TrackStar data. We’re big fans of the company and see the latest pullback as a chance to scoop up shares. Google’s Business Technically, the parent company’s name is Alphabet. But we’ve been around long enough that it will always be Google to us. The company’s core business revolves around internet-related services and products, including its ubiquitous search engine, cloud computing, software, and hardware. Its moonshot factory, X, also pursues ambitious projects ranging from self-driving cars to internet-beaming balloons, constantly pushing the boundaries of what’s possible. In fact, the company plans to spend $5 billion on Waymo in the coming years. Google segments its business into the following areas:
Google is betting big on AI, adding conversational abilities to Google Search and empowering cloud customers with cutting-edge machine learning tools, Their homegrown large language models – PaLM and Gemini – are the secret sauce, turbocharging everything from Gmail to Google Maps. Moonshots like DeepMind’s protein-folding breakthroughs and Pixel phones that can translate conversations in real-time aim to not only compete but exceed their peers. Financials
Source: Stock Analysis While revenue growth has slowed from its +20% YoY pace, it’s regained momentum from its lows in 2022. Google’s been particularly adept at monetizing not only search but also YouTube and Cloud. Like many other Silicon Valley companies, Google went on a cost-cutting rampage, ultimately improving its margins by several percentage points and, in the case of profit and free cash flow margins, turning them around entirely. Google generates $105 billion annually while spending less than half on Capital Expenditures. This leaves plenty of cash to repurchase shares, yielding roughly 3.0% annually. Valuation
Source: Seeking Alpha Google’s current valuation puts it in an interesting position. It’s certainly cheaper than other tech companies like Tesla or Nvidia. But it’s pretty much on par with the likes of Meta (META). Historically, it’s trading a bit below its average P/E and price-to-cash flow ratios on top of trading at 16x forward operating cash flow. Growth
Source: Seeking Alpha While Google’s business is arguably steadier than Meta’s, it isn’t expected to deliver the same growth this year. Given Meta’s lower price-to-cash flow ratio, that may be a better relative valuation. However, Google’s actual profit growth, whether you’re measuring on net income or EPS, beats Meta’s on average. Profitability
Source: Seeking Alpha Interestingly, Google’s margins aren’t as high as Meta’s, though they dominate peers like Baidu (BIDU) or Pinterest (PINS). Still, you can’t argue with Google’s excellent returns on equity, assets, and total capital. Our Opinion 9/10 Google…Alphabet…is a fantastic company. We see it as more structurally important than Meta. However, it doesn’t offer the same value and returns as Meta, which is the tradeoff. We believe Google’s work in AI is finally starting to take shape after getting blown out by OpenAI. And with a recession likely off the table, the company’s dominant search business should continue to deliver strong cash flow in the coming year. |
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