David DriscollAlphabet IncGOOGWATCHDec 27, 2024

Is a triple threat with web services, is designing its own chips and has Gemini. This and Amazon are the leaders.

That was an eye-opener. The Mag 7 has peaked, and it could be a multi-year peak due to the negative free cash flow. GOOG is one of the winners in AI. Once the PE declines or AI spending slows, the stock could react better. The street would be very disappointed if only the core businesses of the Mag 7 were generating free cash flow growth and AI was not. It's tough to look through AI spend and invest the Mag 7 which remain great companies, but now face the biggest risk in years.

It reported after the bell a huge earnings beat, a revenue beat, cloud beat, though the Google Search division was a tad light and most importantly free cash low was negative, a big miss, which is why shares are moving lower after hours. More of this story will follow, though.

He trimmed a little early this year, but likes it. Their relationship with the customer is strong across its platform. Secondly, growth is remarkable. Also, the valuation is reasonable. Their AI model is not the best, but it's competitive. Can you keep your eyeballs on a Google product? Yes. Gemini is integrated in their search, so that removes the threat to their search.

Is undervalued. He predicts that if Waymo were spun off (its self-driving cars are ahead of Tesla's), it would get a ridiculous valuation, and Alphabet stock would soar.

Their fund has held it for years and years. Gemini models show it'll be a leader in generative AI. Trading 26-27x PE, fairly fully valued. 

Their cloud remains one of the fastest-growing businesses in tech. AI continues to make search better.

They join the Dow on Monday which will give it a brief bounce. Key staff leaving hurt the stock earlier this week. Likes GOOG a lot. 

Fears that AI would eat its lunch. Harder for Anthropic to monetize a new tool than for GOOG to take AI and apply it to a business model that it already monetizes. Muscle memory of the populace gravitates to GOOG to find information. Probably thrives in the new AI world, until something more disruptive comes along.

A Hold for him today instead of a Buy, just on valuation (~30x PE). Very robust growth outlook. To add, wait for a bit of a pullback -- the potential for valuation upside gives you less risk, and you can't expect multiple expansion from current price point.

Fantastic year. Recently pulled a bit back from peak. Gemini has been exceptional. Ancillary assets deserve attention. Great long-term hold.

AI monetization is happening, and AI Mode has been a game changer. Stronger cloud growth (revenue grew 63% YOY last quarter, tremendous), broader monetization across platforms. Search and advertising remain strong, lots of cashflow. Also a great ecosystem. 

Good growth, but relatively decent valuation. Yield is 0.25%.

Still one of the highest-quality businesses in the world. Wide range of opportunities despite the runup. Cloud has been doing extremely well. Reasonable valuation. 9/10 on fundamentals. Regulatory scrutiny a potential risk. Massive user base, proprietary data.

First quarter since Covid it didn't buy back stock. Raised capex by $5B. Gemini is outstanding, leading it to win at Search as well as to concrete monetization. Only trading at 22x PE for 2028 and 17% growth. Stock still works, more to go.