Is Philip Morris Stock A Better Pick Over Alphabet Stock?

June 20th, 2025 by Trefis Team

Question: Why would anyone pay 37 times earnings for Philip Morris stock when Google stock is available at a more attractive valuation of 19 times earnings? Most wouldn’t—especially when considering three key points:

  • Growth: Google’s revenue is growing at over 13%, outpacing Philip Morris’s 7% growth. Over the last three years, Google’s average growth has been 10%, slightly higher than Philip Morris’s sub-7% rate.
  • Margins: Google’s profitability stands out, with an average operating cash flow (OCF) margin of 36% over three years, significantly better than Philip Morris’s 30%.
  • Financial Stability: Google’s balance sheet is far stronger, with debt making up just 1% of equity compared to Philip Morris’s 18%. Additionally, Google holds cash equal to 20% of its assets, versus only 7% for Philip Morris.

But Then, Is GOOG Stock A Safe Bet?

That said, Google stock isn’t without risk, as past market volatility has shown. During the 2022 inflation shock, GOOG fell 45%, a much deeper drop than the S&P 500’s 25% peak-to-trough decline. While GOOG did recover to pre-crisis highs by January 25, 2024, it experienced another sharp sell-off earlier this year amid trade war tensions, declining nearly 30% compared to a 19% drop in the S&P 500. Further details can be found in our Buy or Sell Google Stock dashboard. Also check out Archer Aviation: What’s Happening With ACHR Stock?

Image by Christo Anestev from Pixabay

Google’s AI Growth Engine

Google’s AI initiatives are set to meaningfully drive expansion. The company’s Cloud division is well positioned to capitalize on the growing enterprise use of AI, boosting demand for its infrastructure and platform services. AI is also expected to enhance the effectiveness of Search and advertising by improving relevance and targeting, leading to stronger engagement and improved ROI for advertisers. Additionally, AI-driven features are projected to increase YouTube engagement and accelerate premium subscription growth.

What Could Go Wrong?

Earnings might fall short and revenue growth could decelerate from 13% last year to about 8-10% if geopolitical risks increase and economic conditions deteriorate.

Beyond macroeconomic concerns, Google faces internal headwinds, particularly around capital expenditures. Since 2022, its total capex has exceeded $134 billion. The key risk: what if these large investments fail to deliver the anticipated returns? The regulatory environment also poses threats, as the Department of Justice seeks to dismantle parts of the company over alleged monopolistic practices in search. See – Google’s $1 Trillion Lawsuit.

And of course, there’s always the unexpected. If you can’t handle a potential 40% drawdown, this stock may not be for you. The worst move would be to sell at that low. Instead, consult a seasoned advisor—ideally one who’s weathered four bear markets—and explore the Trefis HQ strategy and other smart tactics to navigate downturns. A key takeaway: holding your ground during volatility can lead to substantial gains. Overall, for patient, long-term investors with a 3-5 year horizon, GOOG could still be a compelling opportunity today.

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