We raise our fair value estimate for wide-moat Alphabet to $450 from $433, and continue to view shares as attractively priced. We believe that investors are underappreciating the breadth and depth of Alphabet’s AI monetization and the rapid upcoming growth in Google Cloud.

Double-click on the valuation side.

Current TTM Revenue is $471B, which is up 22% over this period last year ($385B) forecasting this out

BEAR  : 15% growth -> $541B
BASE  : 20% growth -> $565B
BULL  : 30% growth -> $612B

(note: even typing those numbers seems incredible).

Now put some multiples on this (current valuation is $3,460B)

BEAR : 5x = $2,705B   -27%  --> $205 / share
BASE : 6x = $3,390B   - 2%  --> $277 / share
BULL : 7x = $4,284B   +19%  --> $337 / share

I am probably being to optimistic on the BEAR case and too pessimistic on the BULL case; but this gives a reasonable range IMO. ie: If revenue growth were to dramatically slow to under 10% the valuation multiple contract to under 5x (which it has done in the recent past - as recently as 2023-Q1). The 7x multiple is also somewhat conservative for a BULL case; it has traded as high as 11x very recently). Net-Net there is way more upside than downside IMO.

(for those with rose coloured glasses - 11 x $612B = $6,732 or around $420 / share). It really takes a bullish view to get tho $450...

I already have a boat-load of GOOG but am seriously considering adding to it; especially if it trades down to the $250ish range.

tecmo
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