For Alphabet Stock, Google’s Artificial Intelligence Is the Future
The company is investing heavily in machine learning -- and it’s sure to pay off
By Hilary Kramer
Source: Game Changers
http://investorplace.com/2015/11/alphab ... khG03YrKM8
Google stock is girded by $73 billion in cash and only $2 billion in short-term debt.
Google stock has almost $15 billion in free cash flow over the trailing 12 months.
Net income for Google stock increased 21% from $10.7 billion in FY12 to $12.9 billion in FY13, and another 12% to $14.4 billion in FY14. It is on track for about a 10-11% increase this year.
90% of its revenue is advertising.
At $29 per share in estimated earnings for FY15, and a stock price (minus net cash) of $651, GOOG trades at 22x estimates.
That’s not completely unreasonable, but it’s not great, either.
For a company growing net income at 12%, plus the 30% premium I give it for having a world-class brand name, free cash flow and cash on hand, I could justify about a P/E of 16.
But do I want to pay 22x for a company with a non-diversified revenue stream and a VC portfolio? It’s a close call.
The bottom line is that the opportunities are endless for self-driving technology, allowing GOOGL to go in many different directions over the course of many years.
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