Alphabet
Based in California, USA, Alphabet, better known as Google, was founded in 1998 by Larry Page and Sergey Brin. Originally a search engine project at a university, it quickly grew into the world’s largest search engine and online advertiser.
In 2004, the company went public, and a year later, Google expanded its services by acquiring Android and adding Gmail, Google Maps, and YouTube to its offerings. In 2015, Google reorganized itself into Alphabet, which serves as the parent company for several of its subsidiaries. Additionally, other Alphabet services such as Waymo (autonomous driving technology), Verily (life sciences), and Calico (anti-aging research) have also grown over the years. Significant potential also lies in artificial intelligence and cloud services, which the company continues to actively develop.
Today, Alphabet dominates the digital landscape, which is almost impossible to avoid encountering everywhere. Alphabet is the world’s fourth most valuable company with a market capitalization of just under 2 trillion dollars. An euro invested in Alphabet at the end of 2004 would be worth approximately 7200 euros at today’s valuation. Although there are even more spectacular stock rockets in the world, it has been worthwhile to stay invested in this company.
Alphabet’s main source of revenue, as one might expect, is Google’s advertising revenue, which amounted to just under 43 billion USD for the company last year. However, growth in this segment has slowed, and new growth drivers are expected to emerge from areas such as cloud services. The company’s profitability has remained strong, with net margins primarily fluctuating between 20-30% over the past 15 years.
The growth of AI-enhanced Google Search and YouTube has been a significant factor in the company’s success. Artificial intelligence and machine learning have revolutionized search and content recommendations, making them more personalized and relevant to users. This has increased user engagement, click-through rates, and advertising revenue. Features like Google Lens and YouTube’s automatic captioning have also improved user experiences.
Although competition is fierce, Alphabet’s vast amount of user data sets it apart from its competitors. The company collects data from various sources, including Google Search, YouTube, Gmail, and Android devices. This data provides valuable insights into user behavior and trends, enabling the customization of products and services as well as targeted advertisements. Thus, it can be said that Alphabet’s 90% market share in search engines gives it a unique competitive advantage.
Future potential also lies in Gemini LLM, as the next-generation language model is expected to be more powerful and versatile than its competitors, offering multimodal capabilities and handling extensive documents and lines of code. The model is therefore expected to catch up with ChatGPT in terms of features.
What does the stock’s valuation look like currently? Earnings-based valuation appears somewhat expensive compared to its historical average, although higher multiples have been paid for Alphabet. However, in light of the multiples, it’s not a once-in-a-decade buying opportunity, but on the other hand, the growth opportunities created by AI may still be difficult to grasp, and analysts have indeed raised their forecasts for the coming years multiple times over the past year. In contrast, at the end of 2022, the stock could, in retrospect, be bought at a very favorable price. Based on this year’s forecasts, Alphabet is valued at P/E 23.4x, and on next year’s forecasts, 20.6x, with profitability expected to continue improving while growth is also anticipated to be in the low double digits, which would imply very strong earnings growth. Return on capital is also expected to remain in the range of approximately 23-30% in the coming years.
Liian hätäisesti katsoin, että osinkotutto tänä vuonna tuon verran, mutta tarkastanut milloin osingonmaksu on alkanut (tai siis vasta alkamassa). 
Siltä ainakin vahvasti alkaa vaikuttaa.
