Water the flowers

Hmmm, depends on your tolerance for "flat spots". And whether your position is in a tax sheltered account.


Here is some poor reasoning, but illustrative of the general idea:

Alphabet's net margins go up and down a fair bit, so sometimes people look at price to sales ratios.

Sales per share have been growing 15-16%/year lately. Nice.

The current price to trailing sales ratio is 2/3 above its average of at most 7x in the last 10-15 years. (and if anything a dollar of sales will be worth less in future, not more, as capex & depreciation are exploding with the revenue/asset ratio)

Put those two together and you're looking at a central expectation of around four years of zero price growth and 15-16% revenue per share growth to get to a typical multiple valuation multiple based on sales, assuming that there is no slowing in sales per share, no change in net margins, and no regime change in terms of valuation "norms".

Alternatively, you could see the recently typical P/S valuation level of 7x by an immediate price drop of -35 to -45%. I do not predict this, but it's something worth being aware of. Current valuations are a lot higher than what has been usual for this firm; turn that observation into whatever prediction you prefer. But I wouldn't recommend assuming "they'll stay this high".

Jim