GOOGL - Embedded Expectations Analysis - 2021 03 29
Alphabet Inc. (GOOGL:USA) currently trades a recent high relative to UAFRS-based (Uniform) earnings, with a 23.4x Uniform P/E. Even at these levels, the market has bearish expectations for the firm, but given management's excitement about revenue growth, and confidence about consumer spending and online activity, market expectations are too bearish, suggesting equity outperformance is warrantedSpecifically, management generated an excitement marker when saying revenue growth for GCP and Google Workspace increased meaningfully in Q4. Management is also confident their Play app spend per buyer increased due to the pandemic, that Google Services consumer online activity increased, and that they further accelerated investments to strengthen Google Cloud's positioning. Furthermore, they are confident their Google advertising revenues reflect the return of online advertiser spend and that dramatic changes in consumer behavior have changed the way companies do business across many industries and geographies
Given management's excitement about revenue growth, and confidence about consumer spending and online activity, market expectations are too bearish, suggesting outperformance is warranted
Alphabet is a holding company. Through its subsidiaries, the company is engaged in a collection of businesses, which its primary business is Google. The company reports all non-Google businesses collectively as Other Bets. Google's main products and platforms are Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube. The company also provides advertisers with tools that help them attribute and measure their advertising campaigns. In addition, Other Bets includes Access, Calico, CapitalG, GV, Verily, Waymo, and X, among others. Other Bets primarily engages in the sales of internet and TV services through Access as well as licensing and research and development services through Verily.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.