Opinions
Stockchase Insights
Alphabet Inc
GOOG-Q
WATCH
Aug 16, 2024
Stock price when the opinion was issued
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You need to focus on the types of queries that go in. If he wants to learn about uranium and nuclear powering data centres, he'll do a deep dive on ChatGPT. But if he needs new shin pads or a hockey stick, he'll go on Google to find a vendor.
So the search volume is changing in intent, and Search queries in Google are becoming much more commercial. YouTube is an absolute beast.
Dumping a high-growth tech stock then planning to buy back at a lower price is a lot harder than you think. He sold GOOG after the Justice Dept. called GOOG a monopolist. Then, GOOG went up and the Justice Dept. did not break up GOOG. He didn't get back into the stock. In fact, GOOG is worth more if it is broken up into separate companies. He has tremendous remorse over selling it. Lesson: trading is the enemy of many investors.
Thinks it's going higher, but perhaps don't buy now. Wait for pullback. There's always a reason for a stock to pull back at some point, but he can't predict the magnitude.
At this level, risk/reward is not as good as entering at a lower price. Trades ~20-21x forward PE, whereas NVDA is trading at 40x forward PE or more. Lots of upside potential in things we're not even talking about yet, such as quantum computing -- freebies that may not be baked into the valuation today.
Premium contentGoogle's revenue for the last quarter was $96.4 billion. This represents a 6.86% increase compared to the previous quarter, which demonstrates a positive short-term growth. Year-over-year, this is a hike of 13.79%, suggesting solid long-term growth. Social media mentions are up 87.2% in the past 24h.
Some regulatory risks have now lifted. Still a decent valuation of 23x forward PE, discount to mega-cap peers. Continues to dominate digital ad space. Applying generative AI across the board. Cloud's a bit behind MSFT and AWS, but the entire space is growing so revenues are too. $100B in cash reserves gives lots of options.
It has been allowed to keep Chrome so that decision is good for the company. The legal system in the U.S. can't keep up with the fast pace in the market place, especially tech. The anti-trust laws were created over 100 years ago. Google hasn't raised or lowered prices and lots of it is free.
We think this could be a sarcastic way of saying GOOG is showing complacency in innovation relative to other AI companies. Also, GOOG has been criticized recently for over-hiring, which the company has corrected in recent quarters. It is true that large organizations are not as nimble as start-ups, but at the same time, large, well-established companies also possess a more sustainable business model for investors to compound capital more safely.
There is something the venture capital community refers to as the “Innovators Dilemma”, where large organizations (such as IBM, ORCL, etc.) are usually being disrupted by new technologies as the new solutions do not look attractive (usually new technology has lower margins) and does not fit their main business models which have also been their cash cow for many years. MSFT has been the exception where the company reinvented itself to the new technological trend. Therefore, we think technological disruption is what investors need to monitor over time with companies like GOOG, that being said, we think in the near term, it would be really hard to replace GOOG, but the risk should be kept in mind for long-term shareholders. We would note that GOOG spent $47B on research in the last year, and perhaps the CEO is trying to light a fire under employees to ensure this spending results in future growth.
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