GOOGL
📉 The stock has experienced a significant 20% drop in the last month, primarily due to concerns about increased Capex investments.
💰 Despite market reactions, the company’s fundamentals remain strong, with projected continued growth and margin expansion.
📊 Valuation models, even with conservative estimates, suggest a potential annual return of 11-12%, making it an attractive option.
@InvertirdesdeCero:
“Alphabet, for me, is one of the most interesting companies. I encourage you to take a look at its valuation. It accumulates a fall in the last month of 20%. The only data that the market did not like, and well, we can say nothing, we cannot say anything, was that they were going to reinvest a larger amount than expected in Capex. Capex is investment in the business itself, and I already explained to you that it doesn’t matter at all that they invest in Capex because they generate a return of 30% on that Capex. That means that if Alphabet allocates to its business, to reinvest it, it generates 30%. Well, if the company tells me that what it wants is to reinvest and has that ROIC, I applaud it. Do you understand? The market gets angry. Well, the business prospects are exactly the same. It will continue to grow, it will continue to increase margins, it will continue to expand them, it will generate a lot of free cash flow, and this, for me, is one of the most obvious things we can have today in the market. I have made a valuation for you with the estimates of the analysts. Those of you who are students will see it. If we didn’t see it the other day, we’ll see it next week. Well, I’ll tell you, but in this type of environment, when you do a valuation, this valuation is done with our advanced course template that you will have right away, it is very interesting to consider really negative scenarios, because here we have put the estimates of the analysts, but really the thesis, already applying mediocre growth of, for example, 8% without margin improvements. Okay, it will improve due to the cloud, simply applying 8% growth and little else and contracting the multiple to 20 times gives us a return today of between 11 and 12%. If we apply the analysts’ estimates, which we can now take a look at if you want, it gives you a return of 15%, and if you apply 25 times, which depends a lot on the relativity of everything, but here you can see Alphabet. Today it is falling 3%. Alphabet is currently trading, according to Ticker, which is a little cheaper, at about 18.6 times. Analysts expect the company, let’s put it here, to grow. I have valued it growing by eight. They say that, sorry, let’s remove 24, which has already passed, 11, 11, probably 11, 11, 11. I have removed growth because when you value a business in an environment of economic uncertainty to try to say, ‘Hey, I’m going to try to stab it to see if even stabbing it, the thesis turns out well, the profitability turns out well.’ An 11, a 12%. Go to the street and ask someone who can invest in one of the best businesses in the world and that generates 11, 12%. They won’t believe you. Well, we are also applying 20 times PER. If you come here and see this business, you can see that in the last 5 years, this company has been trading around 24 times. Today you have it here at 18, and anyone else would inflate the valuation by applying 24 or 25 times. I apply 20, and even so, it turns out well for me. Well, in an environment of doubt or uncertainty, I try to stab it, and it turns out well. That is the key that you have to know how to do to be successful in investing because you have considered a totally negative scenario that the company will probably far exceed, and even so, the result is favorable. Win-to-win. You will probably be pleasantly surprised.”
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