Google Stock Analysis and Valuation | $GOOGL | Is Google Undervalued?!
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- เผยแพร่เมื่อ 28 พ.ค. 2024
- Google is one of the largest businesses in the world. But is its stock fairly valued? Tech companies like Google (technically, Alphabet) usually trade well above their intrinsic fair value, but recent hype around AI development has scared investors. This presents a value opportunity!
Google is one of the most fundamentally sound businesses I've valuated and my assumptions for growth insist an equivalent annual return of 18% at the current price, as it is well below intrinsic value.
Financials from Q3 (September) 2023.
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Thanks for all the support! I appreciate the corrections you all sometimes help me make - so please, comment your thoughts on assumptions below! And what other companies would you like to see me valuate next?!
Just found your channel. Found your analysis of Google to be very informative and useful. I too have been looking at and acquiring Google as it seems to be undervalued. I see that the major unknown is the adverse impact AI will have on its search ad revenue, which is a major revenue stream. Google seems to be slow at incorporating AI into its search engine capabilities. If they don’t show progress soon in this area they will begin to loss market share to their competitors.
Great video. I used a much more conservative DCF evaluation for GOOG and got much lower intrinsic value but still at a value at today's price.
Thanks for sharing! I love it - everyone needs to apply their own inputs and have their own convictions with proper safety factor/ conservative approach. Otherwise, you won't sleep at night! Keep it up, friend
Nice analysis. The company has so much potential and has a great moat for now but the problem with Google is management. They need to get rid of Pichai as investors are not excited about him and his ability to realize the company's full potential.
I don’t disagree with you that Google just hasn’t reached its full potential- I’m not familiar enough with management and Pichai to know if he’s the root of the issue. I mean, credit to him he hasn’t made the business crumble (look at free cash flow history), but I feel like it does take some innovation and courage to bring the best out of the company, with soooo much runway for dominating and growing immense.
Generally Indian managers are good in low risk, managing stable companies. Indians by nature cannot do aggressive business outside of India . So Google won't crumble. But it wont take its full potential or be more aggressive in expedition
Love your Chanel and learning a lot. Thank you ♥️
Thanks a bunch for the feedback and support
I would buy TH-cam alone for 140.
With the nice dividends and share buybacks, Alphabet share price is too low to be true.
A good chance of crossing $200 anytime soon.
To monitor closely.
Thank you! Would you be open to share your excel sheet for the above calculation?
I am currently working on creating a web-based tool that folks can use that contains all the calculations and assumptions. Due to demand, I think I will create a video in the next couple weeks on the entire process I go through to conduct a DCF valuation with my spreadsheet tool, and share a link where it can be downloaded for free. STAY TUNED!
th-cam.com/video/w-6dSB86PpY/w-d-xo.htmlsi=MBOaw_3uIGb8Js24
Let me know if you have problems downloading the file linked in this video!
Excellent evaluation of Google. Can evaluate NVO?
The manufacturer of Ozempic! This hype has skyrocketed the price/fcf ratio up to 45+ whereas it used to sit consistently closer to 20. I'll see if I have time to make a video about it as an example about how valuation should be connected to fcf and how growth assumptions can affect valuation. Thanks!
th-cam.com/video/_0GmuaAskuQ/w-d-xo.htmlsi=aIZPXN0UzPrGZaFO
Thanks for the recommendation! Just uploaded a video on NVO
Great review of NVO. Thank you 🙏… I have been doing a number of valuations of late and use a combination Morningstar and Seeking Alpha as my data sources. What sources do you use. Can you do a video of metamorphosis process of putting together a valuation? Tools you use…Wanting to see how your process maps to the process that I’ve built to do my validations. My process is built based on Phil Towns book, Rule #1. Happy to share so screen shots of my NVO valuation. I use Excel to do my valuations…
Amazing!!!!
Thorough analysis, but I believe your growth assumptions are very much on the aggressive side.
Thanks! Curious to know, what assumptions would you use?
@@CarilonCapital I believe your MID analysis ends with Google having annual FCF over $1.3 Trillion in 20 years. Personally, feels unrealistic. As a company grows, it just gets hard to continue growing at the same historical rates.
My Mid assumption is 10% average over the next 10 years. And pessimistic is 7% over the next 10 years.
That said, I still hold Google because the math checks out. We just have varying growth estimates.. maybe I'm too conservative haha.
What about Amazon? Is it over valued based on your opinion?
I hadn't done an analysis on AMZN in a few quarters. But I just looked at their Q4-23 financials and ran some assumptions for a fair value assessment...
The FCF for AMZN has been very volatile in recent quarters due to major capital expense projects.... there are a few different ways to interpret the future of AMZN's FCF. I looked at analyst estimates of their EPS going forward five years and they were well above 20% per year growth. Given what I think and trying to stay on the conservative side of things, here are my assumptions and results:
Base Year FCF: 26B
FCF Growth (first 5, years 6-20, perpetual): 19%, 8%, 2%
Share Issuance (5 years, perpetual): 1.5%, -0.5%
Margin of Safety: 25%
Fair Value Price/sh at discount rates 5%, 10%, 15% and 20%, respectively: $270, $85, $50, $35
Since the current price is $177/sh, I see the expected (safe) return being only 7%-8%.
To me, this isn't a great opportunity at the current price... And they have taken on a lot of debt, their FCF pipeline has question marks due to the capital intensivity. On the other hand, I can easily set the assumptions to derive an expected return of 9-10% ($30B FCF base, 22% NFY/ 10% medium term growth, +1% NFY shares growth and -1% perpetual share buybacks, 20% MOS). All that to say, it would take fairly wild assumptions to see Amazon returning Fair Value expected return of >15% at this price. 6/8 Pillars, 15/21 Subpillars.
@@CarilonCapitalThank you for the analysis! This is great. Yes I am going to check out some of your other videos as well since I think there are things I can learn from them.