Alphabet Inc (GOOG-Q)

It remains in the Mag 7 the best performer in the past month and the cheapest as well. They are quieting the bear case in terms of search disruption.

Waymo shouldn't be adding to earnings anytime soon. Much capital has been poured into it and potentially much more is needed. He doesn't know the adoption rate of self-driving vehicles or the profitability potential. Look at Waymo as part of the whole Google play.

Mixed feelings on this one. Warning: rant ahead. Years ago they thought (and still sort of think) that GOOG had all the pieces to win AI. Lots of platforms and good data. Difficulty is that may not matter because it needs to figure out where it's going to fit in AI. 

ChapGPT has become synonymous with AI, and you could argue it's won the consumer subscription game already. Doesn't see anyone displacing MSFT on enterprise solutions; he tried Copilot, and it's still bad, but that doesn't matter because we're all held captive. MSFT is set to win enterprise AI as its AI improves over time.

So where does GOOG fit? He's a big Google fan, and the only person he knows with a Pixel phone. Search is the crown jewel, and such a big part of the overall business. Will they have to cannibalize themselves to win in AI? Competition has never been higher for Search. Older folks say "googling", but young people don't. They "search", and they don't care where they're doing it.

Can still deliver decent results, but the multiple will be capped at the very least. Cheap at the surface level, but there are reasons for that. He's still comfortable holding. Great job in Gemini, for example, but it needs to be monetized. Fun fact: Between ads and subscriptions, YouTube is bigger than NFLX.

Legal problems in US, those in India seem to be resolving. Will do well going forward. Has figured out how to monetize AI for the end user. AI does present a challenge to Search, but this company will innovate. Likes it, will continue to deliver results as a long-term play despite the moments of increased volatility.

If you break this up into parts, those parts would be worth more than the sum. The great fear is over search, given chatGPT's threat. About 55% of GOOGL's revenues come from search, but their informational and commercial search is only 40% of all revenues. So maybe 25% of overall revenues are at risk. But YouTube, android and cloud segments are performing very well. You pay 17-18x PE but offers double-digit growth.

Sometimes ensnared in unfavourable headlines. Will probably prevail in US court cases. In his momentum mandate, continues to like and buy. Dominant player in digital advertising through Search, which makes up 70-75% of revenues. Really likes the cloud business (we may be in middle innings of cloud hosting). Lots of "other bets" that could pay off spectacularly. 

Fears that ChatGPT and Perplexity could dislocate them in Search, but Gemini is being wired into the Search functionality and adding value to Search. Behaviour entrenchment in Search will be hard to dislocate. Remember that we use the word "google" as a verb now, which speaks to 25 years of habit-forming consumer behaviour. Will maintain its dominant position as long as it keeps investing in R&D and upping its game.

12-month price target of $203. Viewers should check out Gemini; it's really a leader, and that's because of Google Search. Concerns that competitors will eat GOOG's lunch on this, but if you try it out you'll see that Gemini sets the bar quite high. 

Lots of litigation out there, but this name (and other favourites) have so many horses in the race like hidden gems that will come to fruition. And you're getting Waymo for free.

They are the leader in search and the criticism is that they will lose market share. So sell Google? He argues that Alphabet will recapture that share, because GOOG is a leader in AI as well. Yes, GOOG will lose some of their current 92% share in search, but maybe the overall pie grows bigger, so GOOG revenues will still expand. Also, GOOG has a lot else going on--YouTube is massive with 1 in 3 humans using it, Waymo. Shares have sold off so much that the PE is below the market average now.

He considers it a value stock with concerns about anti-trust laws and also about AI Chatbot etc. taking away from their search business. It shows 14% revenue growth but the question is the weighting in your portfolio. Growth could slow down.

Very positive outlook, based on generative AI trend. The most controversial of the Mag 7, as AAPL reported yesterday that search queries are down for the first time ever. That struck a negative tone on GOOG. Over time there may be more competitors, and pricing may have to come down. Trades at only 15x earnings, good value here at $150-155.

They won't sit still (and could buy a competitor), and Gemini is highly respected, but the company hasn't promoted it well. There is opportunity, but most of their revenue is coming from traditional advertising on Google search--that's a problem. YouTube is fantastic generating lots of ad revenue. Also, how do you make money off chatGPT? Maybe this problem is already priced into GOOGL, since its PE has come down.

He just trimmed. How often are you using Google search vs. chatGPT (85/15 for him). Ad dollars will decline within Google. He wanted to reduce his overweight in GOOGL and hang onto a little. Are lots of reasons to like GOOGL, still because of lots of other businesses, but search is their golden egg.