Sep. 12, 2023 12:03 PM ET Alphabet Inc. (GOOG), GOOGL
- Google has benefitted from a recovery in online advertising.
- The value in Google Cloud can no longer be ignored as the unit generated operating profitability once again at 28% top-line growth.
- The company maintains over $100 billion in net cash.
- The stock remains cheap here, and I am projecting considerable upside in the years to come.
The article discusses the author’s bullish outlook on Alphabet Inc. (NASDAQ: GOOGL, GOOG), commonly known as Google, and reiterates a “Strong Buy” rating for the company’s stock. Here’s a summary of the key points:
- Strong Recovery in Online Advertising: Google has experienced a recovery in online advertising, with robust financial results, including 7% year-over-year revenue growth (9% constant currency) in its most recent quarter. The company’s Google Cloud division also posted impressive results with 28% year-over-year revenue growth.
- Profitability and Cost Discipline: Google’s improved profitability is attributed to factors such as cost discipline, headcount reduction, and share repurchases. The company has reallocated costs, showing a commitment to operational efficiency.
- Generative AI Potential: Google is recognized as a leader in artificial intelligence (AI), with a focus on generative AI products. The company’s investment in AI is seen as a growth driver, with nearly 80% of advertisers using AI-powered search ads products.
- Valuation and Potential: Despite its strong fundamentals, Google’s stock is trading at undemanding multiples compared to some of its tech peers. The article highlights the potential value in Google Cloud and net cash on the balance sheet.
- Risks and Competitiveness: The main risk identified is the potential for Google’s search business to face competition from emerging technologies like generative AI. However, the author believes that Google’s diverse business lines and strong narratives can help it maintain its competitive edge.
- Outlook: The author expects Google to continue benefiting from strong narratives in the near term, driven by margin expansion efforts and aggressive share repurchases. They also anticipate potential growth acceleration in the company’s cloud division.
In conclusion, the author reiterates a “Strong Buy” rating for Google’s stock, emphasizing the company’s strong fundamentals, net cash position, and the potential for growth in its cloud division. They believe Google offers considerable value for investors.
