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Alphabet Inc Class A - Stock Quote GOOGL

Rating as of

Morningstar's Alphabet Inc Class A Stock Analysis

Valuation
Currency in USD
GOOGL is Undervalued at a 34% Discount.
GOOGL is Undervalued at a 34% Discount.

1-Star Price

> 5,580.00

5-Star Price

< 2,160.00

Economic Moat

Wide

Trend: Stable

Capital Allocation

Exemplary

Alphabet Continues to Lead the Online Ad Space

Ali Mogharabi Senior Equity Analyst

Business Strategy and Outlook

| Ali Mogharabi |

Alphabet dominates the online search market with Google’s global share above 80%, via which it generates strong revenue growth and cash flow. We expect continuing growth in the firm’s cash flow, as we remain confident that Google will maintain its leadership in the search market. We foresee YouTube contributing more to the firm’s top and bottom lines, and we view investments of some of that cash in moonshots as attractive. Whether they will generate positive returns remains to be seen, but they do present significant upside.

Google’s ecosystem strengthens as its products are adopted by more users, making its online advertising services more attractive to advertisers and publishers and resulting in increased online ad revenue which we think will continue to grow at double-digit rates after the pandemic and during the next five years. The firm utilizes technological innovation to improve the user experience in nearly all its Google offerings, while making the sale and purchase of ads efficient for publishers and advertisers. Adoption and usage of mobile devices has been increasing. The online advertising market has taken notice and is following its target audience onto the mobile platform. We have seen Google partake in this on the back of its Android mobile operating system’s growing market share, helping it drive revenue growth and maintain its leadership in the space.

Among the firm’s investment areas, we particularly applaud the efforts to gain a stronger foothold in the fast-growing public cloud market. Google has quickly leveraged the technological expertise it applied to creating and maintaining its private cloud platform to increase its market share in this space, driving additional revenue growth, creating more operating leverage, which we expect will continue. Regarding Alphabet’s more futuristic projects, although most are not yet generating revenue, the upside is attractive if they succeed, as the firm is targeting newer markets. Alphabet’s autonomous car technology business, Waymo, is a good example: Based on various studies, it may tap into a market valued in the tens of billions of dollars within the next 10-15 years.

Alphabet Inc Class A's Company Profile

Business Description

Alphabet Inc is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google's other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue. Alphabet's moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet's operating margin has been 25%-30%, with Google at 30% and other bets operating at a loss.

Contact
1600 Amphitheatre Parkway
Mountain View, CA, 94043
T +1 650 253-0000
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type Aggressive Growth
Employees 163,906

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