Alphabet Stock Analysis (August 2023)

Should you buy Alphabet stock? GOOG/GOOGL
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About 6 months ago, Alphabet reported a sharp increase in operating expenses and a decline in advertising revenue. Some investors worried that ChatGPT was going to be a Google killer and the stock had fallen to under $100 a share.

That fear was put to bed last week as the company reported a 7% increase in revenue, a 15% increase in net income and operating margins of 29%.

The stock has now recovered by one third giving the company a market cap of 1.67 trillion dollars. With almost $118 billion of cash and investments and 14 billion of long term debt, the enterprise value is roughly 1.57 trillion.

That makes Alphabet one of the largest companies in the world and its easy to see why. The company generated 290 billion dollars of revenue over the last 12 months, including 61 billion of net income and 71 billion of free cash flow. Earnings per share has grown 18% a year over the last 10 years. Even so, Alphabet stock is not particularly expensive, it’s valued at 26 times earnings and 22 times free cash flow.

Looking at the individual segments, Google search revenue increased 5% to 42.6 billion, YouTube ads increased 4.4% to 7.7 billion and Google cloud revenue increased 28% to 8 billion. Google network dropped 5% but Google other which includes hardware and subscriptions rose 24% to 8.1 billion. And the company also bought back 15 billion dollars worth of stock.

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