Is Alphabet Undervalued?
No, as per Trefis Price estimate Alphabet‘s (NASDAQ:GOOG) stock has a fair value of $1299, which is lower than its current Market price. Alphabet is a collection of businesses – the largest of which is Google. It also includes businesses far away from the company’s main internet products in areas such as self-driving cars, life sciences, internet access, and TV services. Google has a chain of internet products designed for work, email, time management, cloud storage, instant messaging and conferencing, mapping and navigation, video sharing, payment interface, web browser, and various other services.
In this note we discuss our stock price valuation for Alphabet. You can look at our interactive dashboard analysis ~ Alphabet’s Valuation: Expensive or Cheap? ~ for more details, and also modify our forecasts for the company’s key metrics to understand how changes impact the company’s stock price.
#1. Estimating Alphabet’s Total Revenues:
- Total Revenue increased from $90.3 billion in 2016 to $136.8 billion in 2018, and is expected to increase by 25% to $171 Billion in 2019
- Our Interactive Dashboard Analysis, How Does Alphabet Make Money?, provides an in depth view of Alphabet’s Revenues.
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#2. Deriving Alphabet’s Net Income:
- Net Income increased from $19.5 billion in 2016 to $30.7 billion in 2018, and is expected to be around $30.5 billion in 2019.
- This fall will likely be led by a decrease in margins partially offset by higher revenues.
#3. Determining Alphabet’s EPS:
- EPS has risen from $26.06 in 2016 to $43.70 in 2018, and we estimate it to be $43.38 in 2019.
- EPS rise in 2018 can be attributed to higher Net Income and lower Shares outstanding.
#4. Estimating Alphabet’s Share Price:
- Our Price Estimate of $1299 for Alphabet’s Stock is based on our Detailed Valuation Model, and implies a 30x P/E Multiple on expected 2019 EPS of $43.38
- Our interactive dashboard captures how Alphabet compares with its competitors Amazon and Facebook in terms of Revenue and P/E multiple.
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