5 min read

Google Stock Analysis 🤑 I bought $27K... is it a good buy?

I'm a big tech guy... and Google is one of my favorite stocks. I believe we're in a rare time where there is huge value and discounted valuations on large growth (tech) companies, like Google for example. This type of risk/reward ratio never existed before...
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Fellow Investors,

I'm a big tech guy... and Google is one of my favorite stocks. I believe we're in a rare time where there is huge value and discounted valuations on large growth (tech) companies, like Google for example. This type of risk/reward ratio never existed before, because typically you're paying quite a substantial premium for growth – but that's not the case here. That being said, before investing in ANYTHING you should have your own assessment of fair value and your own price target. That'll help establish when to buy (and at what prices) and when to sell (if ever). That's what we'll discuss today.

Google's Story

It all started in 1995 in a Stanford University dorm room. Larry Page and Sergey Brin had a bittersweet relationship, which ultimately led them to co-founding Google. The underlying problem their search engine was trying to solve for, was determining the importance of any specific page on the Internet. The "importance" was given a rank, based on the incoming links (a.k.a. backlinks) to the page or site. So, when you searched Google (then known as Backrub) you saw the most important or relevant pages first. This is the very basic of what later became Search Engine Optimization (SEO).

Larry Page and Sergey Brin upgraded from dorm room to garage in 1998.

3 years after founding the company, in 1998, Larry and Sergey received their first $100,000 investment and upgraded their office to a garage owned by Susan Wojcicki (employee #16 and now CEO of YouTube).

Today, Google makes hundreds of products used by billions of people across the globe, from YouTube and Android to Gmail and, of course, Google Search. It is an amazing success story, and nothing short of inspiring.

Google's Revenue Breakdown

The bulk of Google's revenue (and profitability) is from advertising. This is primarily driven by Google Search, YouTube and the Google Network. They basically make money from the ads you see using those platforms and publisher sites monetizing via Google Ads or AdMob (for mobile apps). Along with Other Revenues, which come from Google Play (app store), YouTube Premium and TV, and hardware sales (i.e. Nest, Pixel, etc.), these are all bundled as Google Services.

The other segments of Google's revenues are Google Cloud and Other Bets. Google Cloud has been growing at about 50% per year. We know this is a fast-growing, very profitable market. Although Google Cloud is not yet profitable, I'm expecting it to be (in my valuation model) very soon.

Google Cloud, although significantly behind Amazon AWS in market share, is growing faster.

Other Bets is more like Google's incubator fund, which I'm not expecting to be profitable. But, there are some really interesting potential home runs there, like Waymo – an autonomous driving technology company making significant progress.

Moat & Future Growth

Google's moat is pretty clear... "just google it". The fact that its brand has become a verb in everyday use speaks volumes. THAT is its moat. There is no comparison or competitor to Google Search because of the stronghold it has as market leader. The race was years ago between Altavista, Lycos, and Yahoo Search. Google clearly won. It's game over now.

They are even teaching Google as an English word in Africa.

Another key moat for Google right now is YouTube. They already dominated web search and now they're dominating video search. Similar to "googling it"... "YouTubing" has also become a recognizable verb. When a brand becomes a verb – which Google holds two of them – it becomes almost impossible to compete with.

Google's Fair Value

As always, the details of my fair value calculation and working papers are available to premium subscribers only, however you can see the preview and assumptions here. I go more in-depth in the YouTube video as well. I (with bias) recommend you watch.

In summary, Google's main advertising business is highly profitable, massive and still growing. Even with conservative estimates for the next 5 years, I get a $4,556 fair value (FV) per share. I give a weighted-average of the FV along with other price targets based on historical ratios, and still get a $4,200 price target. That's a 53% upside from where we are today! Exactly why Google is one of my highest conviction stocks, which I plan to be overweight on.


  1. Regulatory Risk - This is an ongoing fear that regulators will step in and try to break up big-tech like Alphabet. But, so far, regulators have had no luck. I also think that breaking up Alphabet would only be a buying opportunity, because the collective entities (in the unlikely case its broken up) would likely have a higher market cap than in Alphabet stock alone. The fundamentals wouldn't really change in my opinion.
  2. Interest Rate Risk - This is a real risk to the valuation of these big-tech stocks today. Should interest rates rise too quickly, we will for sure see a downwards pressure on prices. We saw a preview of this last March, and it was (in hindsight) just another buying opportunity. Should this happen again, I would assume the same. But, this is a real risk to consider before going all in with tech. Diversification would be your best mitigation here.

Is Google A Good Stock To Buy?


But, of course, none of this is financial advice.

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