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The stock price of Alphabet the parent company of google plummeted recently along with the rest of the stock market due to the global health crisis.
After analyzing the stock of google, it was clear to see that this drop in share price was unjustified. As although Google’s advertising revenue would take a hit it’s multiple businesses still dominate the landscape & are seeing even greater usage.
From Google search numbers increasing to Google Hangouts the video conferencing software which saw a boost as more people were forced to work from home.
Even Youtube, what your watching right now is owned by google and is the 2nd most popular social media platform!
Spotting this I purchased shares in the Google securing it at over 30% below it’s calculated fair value.
Now recently Alphabet Announced its Q1 earnings for the year 2020, which were better than expected! Googles advertising revenue was not hit as hard as many expected.
This caused the stock to rally by over 8% in the past 24 hours!
Now many would say Alphabet is now too expensive to buy similar to other tech giants such as Amazon & Microsoft. However, I disagree….In this video I’m going to discuss WHY I PERSONALLY am still BUYING SHARES IN GOOGLE despite the recent rally! I’m going to fully analyse the business, it’s market positions & it’s stock.
LETS DIVE IN! (Intro from other vid)
Google is a power house tech giant, in which its share price has skyrocketed in the past 10 years. For example, If you had invested in google back in 2010 you be up by over 400%
Now that beats the 0.5% interest in the bank!
Now although Google’s share price did take a plummet due to the global health crisis it didn’t fall as far as some others companies.
To me this makes perfect sense, Google is the Number 1 Market leader in ONLINE ADVERTISING so of course as a recession hits, people will reduce spending & advertisers will cut back. This should cause a share price drop as earnings will be affected.
However, my thoughts are that the stock market over reacted! So I saw this plummet as a great buying opportunity!
Now you may think you have missed out, but despite this googles share price has been rallying recently, I’m still buying shares and here’s WHY!
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GOOGLE is the dominant market leader in Internet search. It has a market share of over 90% worldwide. If you didn’t know this “Just google it” 😊
From it’s google search, to google images & of course Youtube , the worlds largest video search engine where you can search for valuable investing content such as video’s like this at Motivation2invest (Subscribe) .
Countries such as China & Russia are the only ones which have not fully succumb to the dominance of google search.
Google is not just a market leading search engine.
Google Maps:
Google is also the market leader in mobile mapping, with google maps & street view.
(Show screenshot)
Google Home? (Voice search)
Google home is also making headway in the voice search & smart home market.
2nd only to Amazons Alexa which currently has 52% of the market share. However, Loup Ventures have predicted google home to become the smart speaker market leader by 2022!
Google & Android
Lets not forget about android.
Google Acquired Android way back in 2005. Which is now the NUMBER 1 MARKET LEADER in mobile phone Operating systems.
Android currently has nearly 75% of the market share, with apples IOS software having close to 24% market share. (Although I do prefer apple’s IOS software)
Google Licenses this software to all the major cell phone manufactures such as
Samsung with their popular galaxy smartphones & Huawei. (HUA WEI) (WHOOA WAYY)
(Screenshot)
Google also has it’s own series of impeccable smartphones such as the google PIXEL. You should also notice when you google “best smartphone 2020” Mostly android devices show up! This is where google has an immense competitive advantage as a BIG DATA LEADER.
(BUT WAIT THERE IS EVEN MORE!)
Google cloud
Google’s cloud software is also making real headway with Google cloud seeing a massive jump in data storage. In addition, Google hangouts the video conferencing & collaboration tool has also seen a massive boost in popularity during the lockdown period.
Although google accounts for only 8% of the global cloud infrastructure market share. This industry is growing massively & is currently worth $96 billion dollars!
The worldwide cloud services market grew over 40% in 2019, and IDC expects cloud spending to increase at a compounded annual growth rate of 22% between now and 2023.
Then there is Google Classroom, for students. This service is experiencing major usage at scale
Oh & did I mention autonomous vehicles!!
This is a rapidly growing industry with the global self‑driving cars & trucks expected to grow by over 60% from 2021 to 2030. According to an industry report by Grand View research.
Google Stock Analysis?
SO I KNOW what you may be thinking “Ben that all sounds great” but what about the stock itself & the numbers!
Alphabet has a Pristine balance sheet with $121 billion in cash & equivalents with just $4 billion in debt.
With such a strong balance sheet, Alphabet will have no issue weathering this current economic storm & can even make large investments in R&D to maintain its lead in various industries & develop new products & services.
It can also use this excess cash to buy back shares which will further boost the share Price.
What about profit margins?
Alphabet seen an increase its sales & maintained excellent profit margins.
Its net profit margin has held over 20% for the last three years if we exclude the one-time impact of tax changes in the U.S in 2017, while revenue also grew 20% in each of the previous two years.
It’s always a good sign to see a company which can increase its sales without sacrificing its profit margins. This indicates a company in which it’s products and services are holding pricing power. In other words it doesn’t have to be the cheapest in order to make a sale.
FINAL THOUGHTS?
Overall, Alphabet ‘s stock has a forward Price to earnings ratio of just 25 which is good value when you consider all the positives.
For example, the S&P 500 has an average P/E ratio of 16, now I would not agree that a company such as Alphabet is only slightly above average!
For instance, Amazon is an incredible company but it’s valuation is also incredible with a P/E ratio of over 100!
From all the factors, mentioned previously you can see why I purchased shares in Alphabet & will continue to do so during any market dips.
IN the words of the great investor warren buffet
“Its better to buy a GREAT company at a FAIR price than a Fair company at a great price.”
WHAT do you think of Alphabet as a company & as a stock? Who do you can challenge them? Drop your thoughts in the comments below!
