Isn't Goog undervalued?

Microsoft / Eng SJRBE
Sep 6, 2018 22 Comments

Goog has YouTube which is atleast worth the same as Netflix.
Ads network : 10 times that of FB.
Google Cloud: Still small but a lot of growth potential and this market has place for 3 big players.
Productivity tools : GDocs on web is much better than office 365.
Waymo: Could be big.
Playstore network because of Android.
Most of the business are growing.

I feel that if MSFT can rise so much in the past 2 years because of azure which was down for more than 20 hours yesterday, either we are over valued or Google is undervalued.

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TOP 22 Comments
  • Salesforce Zlwi01k
    “Google Cloud: Still small but a lot of growth potential and this market has place for 3 big players.”

    A truly diligent analysis of the market space. Undeniable.
    Sep 6, 2018 1
    • Microsoft / Eng nvcs
      being sarcastic or not?
      Sep 6, 2018
  • Uber / Eng
    tROh00

    Uber Eng

    PRE
    Google
    tROh00more
    Maybe G is not undervalued, but FB is overvalued.
    Sep 6, 2018 1
    • Microsoft / Eng SJRBE
      OP
      May be, even then it makes it a good buy over FB and msft right now.
      Sep 6, 2018
  • Citibank / R&D whatdabump
    PE is 52, meaning you’re paying $52 for every $1 of earnings. By all accounts that’s rich and a bet on future earnings. 15- 17 is considered fair value based on historical standards.

    The question is essentially projection. Of future earnings. Your guess is as good as the analysts or chance.
    Sep 6, 2018 4
    • McAfee okgoogl
      Google paid 5B$ in penalties last quarter which dented their P/E ratio. If you discount that one time payment, they are at a 30 range which is better than MS.
      Sep 6, 2018
    • Google Vdzlw
      16 is not fair value when a company has double digit growth. That's for a company with 3% growth.
      Sep 6, 2018
    • Microsoft gfba68
      Microsoft is trading at a forward PE of 23. It is a bit cheaper than Google on an earnings basis
      Sep 6, 2018
    • Citibank / R&D whatdabump
      @vdzlw yes that’s correct (sort of). Not sure about 3% growth being correlated to 15 - 17 PE but I agree with your point. As I stated the bet is on future earnings. Will they continue to grow at the same rate or will their earnings normalize? As others have stated you’re betting on a moon shot or two right now. Otherwise their earnings are derived mostly from ads, which can and will take a hit if the economy falters.

      @gfpa, forward earnings is based on projections, which IMO are a good measure when looking at a group of companies like a sector. Too much variability when looking at an individual company.
      Sep 6, 2018
  • Apple / Eng cho Chang
    YouTube is not worth the same as N. All of N’s user base is paid subscribers (except free trials). YouTube has very few paid subscribers in comparison.
    Sep 6, 2018 0
  • Amazon / Eng ThePolice
    I mean this is not how valuation works. Potentiality or "better product" doesn't necessarily translate into $$$.
    Sep 6, 2018 0
  • Microsoft DOyu71
    Microsoft has 21 1B or greater businesses. Google has ads.

    Whether you think google docs is better online or not, most enterprises do not or at least feel that gdocs does not have the breadth
    of features they need.

    Saying that "azure" was down for 20 hours (and not realizing that gcp has had various services down for 20+ hours relqrively recently as well) shows you dont know much about these offerings.

    Apart from the fact that valuation doesnt work at all how you think it does, there is nothing inherent on Google's portfolio that makes them necessarily worth more than they already are.
    Sep 6, 2018 1
    • Microsoft / Eng
      Whereisthe

      Microsoft Eng

      BIO
      Hate coding quizzes but studying hard for better future!
      Whereisthemore
      Google has ada? Ad is just a way to sell their business. Sure they have Ad as a product itself as well but most of their services could switch to premium which will incur fees. They are already moving in this direction. Microsoft could also sell services via ads including Windows.
      Sep 7, 2018
  • Amazon
    futex

    Amazon

    PRE
    Google, Uber
    futexmore
    Microsofts valuation isnt based on Azure. Its mostly Office on the cloud (and windows which will be dominant on desktop for years to come)
    Sep 6, 2018 0
  • Microsoft romba
    Lol, G's 90% of rev comes from ads. Important pieces(retail ads) of that business are under constant attack from competition(amazon, fb, snap etc.)

    This dependence on single rev stream doesn't demand higher PE.

    G does have many other bets. But they dont generate any profits yet.
    Sep 6, 2018 2
    • Microsoft / Eng
      Whereisthe

      Microsoft Eng

      BIO
      Hate coding quizzes but studying hard for better future!
      Whereisthemore
      Ad is just a money collection way. They can switch to subscription based. Microsoft could also choose to sell the product with ads but didn’t (couldn’t). Google can switch from ad based to subscription based. Products are diversified in internet world than any other companies. Imagine they make people pay for gmail, google map, google photo or Android. Free service with ad can be just a decoy to attract the customers quickly and hook them on services.
      Sep 6, 2018
    • Microsoft romba
      You have to understand the business model. Strength of the current model is to create intelligent experiences through millions of user's data. Making this a paid model will weaken G's strength and further erodes PE
      Sep 7, 2018
  • Gen!x / Eng
    ixptl12

    Gen!x Eng

    PRE
    startups, JPMorgan Chase
    BIO
    ¯\_(ツ)_/¯
    ixptl12more
    Lol. Apparently not
    Apr 30 0
  • AppDynamics Fqurap
    Waymo ?
    Sep 7, 2018 0
  • Microsoft / Eng
    Whereisthe

    Microsoft Eng

    BIO
    Hate coding quizzes but studying hard for better future!
    Whereisthemore
    I think Google will eventually find a way to monetize their free service. Youtube is trying to switch to subscription based model with premium service. Android will have to be pay per OS due to EU lawsuit (or Google can simply use that as an excuse). Google’s AD is just a tool to attract users fast to their service which they had been successful so far. I think they will eventually find a way to monetize most of the services. I am not sure Sundar is the right guy though. There are different leaders for different times of the company. I think it is time to find a way to monetize for existing services including Youtube. Well Youtube started contributing much but it has so much more potential. Design is their weakness. They also need to build more services on top of existing ones. Need to start integrating services.
    Sep 6, 2018 0
  • Microsoft gfba68
    Microsoft isn't rising just because of Azure. All its business are growing well and enterprise b2b revenue in general is higher quality than ad revenue because it's more predictable. Microsoft deserves a high valuation. Google seems fairly valued to me, neither too high nor too low. YouTube isn't worth anywhere near what Netflix is.
    Sep 6, 2018 0
  • AppDynamics Fqurap
    Google is undervalued If you believe next 60 years are for AI ? You know who would excel. Just keep buying its stocks
    Sep 6, 2018 0

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