Stock (Symbol) |
Google (GOOGL) |
Stock Price |
$711 |
Sector |
| Technology |
Data is as of |
| May 5, 2016 |
Expected to Report |
| Jul 21 |
Company Description |
 Alphabet Inc is a collection of Companies. Alphabet’s collection include Calico, Google’s health and longevity effort; Nest its connected home business; Fiber, its gigabit internet arm; and its investment divisions such as Google Ventures and Google Capital, and incubator projects, such as Google X. These will be managed separately in Alphabet. On October 2, 2015, Google implemented a holding company reorganization pursuant to the Agreement and Plan of Merger (the Merger Agreement), dated as of October 2, 2015, among Google, Alphabet and Maple Technologies Inc., a Delaware corporation (Merger Sub), which resulted in Alphabet owning all of the outstanding capital stock of Google. Pursuant to the Alphabet Merger, Merger Sub, a direct, wholly owned subsidiary of Alphabet and an indirect, wholly owned subsidiary of Google, merged with and into Google, with Google surviving as a direct, wholly owned subsidiary of Alphabet. Source: Thomson Financial |
Sharek’s Take |
 Google (GOOGL) lets you down like only your favorite sports team would. After beating the street for three consecutive qtrs, the company missed earnings estimates last qtr, causing the stock to drop on the news and lose its momentum. We had been expecting 21% profit growth (maybe more?) and at 23x earnings the stock could have continued higher had it posted a better number. But instead the company coughed out 14% growth, and the stock fell from $780 to a low of $703 in the five days after it reported. (BTW management doesn’t give estimates so they are basically saying don’t look at me). Revenue rose 17%, and I think profits should have rised at least that much. But GOOGL lost a ton of money on “other bets”. What are we left with now? The stock sells for 21x earnings, has an estimated long-term growth rate of 16% (same as last qtr) and qtrly profit estimates for the next 4 qtrs are: 15%, 14%, 9% and 21%. That’s an average of 15%. I feel the stock has bottomed here. I don’t think it has the momentum to make a big move higher unless growth stocks come back into favor. I can imagine the stock selling for 21x earnings next year and if earnings do grow 15% that would equate to a 15% gain in the stock price. Overall Google is a safe growth stock that’s good for both conservative and growth investors, but like your favorite sports team it will get you excited about the future only to break your heart during the big game. This is a long-term investment, you have to buy-and-hold. |
One Year Chart |
 My lead-in paragraph was kinda negative compared to the one-year chart. Notice the big jump GOOGL made from $550 to $700 almost a year ago. That was caused by the company beating the street and vowing to be more shareholder friendly — which it was, for two qtrs. But last qtr I felt the company was growing profits in the 20% range and now that’s dropped to the 15% range. Luckily the P/E wasn’t too high, else we could have seen a bigger tumble than the 10% the stock just had. Estimates declined across the board, but nothing to drastic. 2016’s fell from $34.52 to $33.53. |
Fair Value |
 My Fair Value on this stock is 22x earnings, down from 23x last qtr. GOOGL priced pretty accurately right now, and notice how profits have grown every since year this past decade (every year since it went public too). 2017’s Fair Value is $873, so if we sit and wait with the stock hopefully we will be rewarded. |
Bottom Line |
 Google has been a good stock to hold during the last decade when we look at the long-term picture. But the stock has given me many sell signals, then buy signals, then sell signals and buy signals. I used to buy-and-hold GOOGL years ago but have recently reacted to these signals, which has often left me buying and selling at the wrong time. The big picture here is Google is a solid stock that’s delivered mid-teens growth the past decade and we should buy-and-hold and hope that continues. |
Power Rankings |
Growth Stock Portfolio
9 of 37Aggressive Growth Portfolio 9 of 17Conservative Stock Portfolio 3 of 35 |
