Is Google A Buy?

🌟🌟🌟President Donald Trump sets the tone on his first day in office by reversing dozens of executive orders he called harmful executive orders and actions including Executive Order 14110 enacted in 2023 about the safe and secure use of AI. This Executive Order was to guide responsible AI development, deployment and regulation.

Following the revocation of this Executive Order, $Alphabet(GOOGL)$  $Alphabet(GOOG)$  Google jumped to reach its all time  high at USD 202.29.  However since then it has dropped to close at USD 198.37 on Wednesday.

Is Google A Buy?

Google is up 2.7% in the past 5 days and has risen 4.7% since the start of January this year.  In 2024, Google has popped 35.8% beating $SPDR S&P 500 ETF Trust(SPY)$  which has only risen 25% in comparison. 

Google reported an excellent Q3 24 Earnings with consolidated revenues up 15% year over year to USD 88.3 billion, reflecting strong momentum across the business. 

Google Services revenues increased 13% to USD 76.5 billion, led by strength across Google Search, Google subscriptions, platforms and devices and You Tube ads.

Google Cloud revenues increased 35% to USD 11.4 billion led by accelerated growth in Google Cloud Platform across AI Infrastructure, Generative AI Solutions and core Google Cloud Platform products. 

Total operating income increased 34% and operating margin expanded by 4.5% to 32%.

Net income increased 34% and Earnings Per Share increased 37% to USD 2.12.

Google's CEO Sundar Pichai said that the momentum across the company has been extraordinary.  Google has a commitment to innovation and a long term focus to invest in AI which has resulted in its consumers and business partners benefiting from its AI tools. 

In Search, Google's new AI features are expanding what people can search for and how they search it.  In Cloud, Google's AI solutions are helping drive deeper product adoption with existing customers, attract new customers and win larger deals.  YouTube's total ada and subscription revenues surpassed USD 50 billion over the past 5 quarters for the first time. 

Google also paid dividends of 20 cents per share  on December 16 2024 totalling USD 2.5 billion for the 3 months ended September 30 2024. 

Q4 24 and full year earnings are due on February 4 with Wall Street Analysts projecting Earnings Per Share growth of 29% to USD 2.12 with revenue growing 12% to USD 96.7 billion.  Analysts also predict Google Search advertising growth of almost 10% to USD 216.5 billion. 

In December 2024 Google's shares rose about 5% after it unveiled a new generation chip called Willow which it said helped overcome a key challenge in quantum computing.   Willow performed a computation in under 5 minutes that would take a supercomputer 10 septillion years, demonstrating its potential for solving complex problems beyond the reach of classical computers. 

Google said that it found a way to string together qubits in the Willow chip so that error rates decline as the Number of qubits rise, adding that it can also correct errors in real time.   This means that Google is at the forefront in the development of quantum computing which is still very much in its early growth stage of development. 

In December, Google has also unveiled its new AI model Gemini 2.0.  Google's AI Overviews system uses Google's in house Gemini AI model.  According to Google, advertisers using Gemini AI tools, see increased traffic and click through rates, especially among the younger demographics. 

Google's Waymo is widely viewed as the leader in Autonomous Vehicles as it has reached 150,000 trips per week with rapid growth from August levels at 100,000 per week.  Waymo has announced that it also plans to expand its autonomous vehicle rideshare service to Miami in 2026.  If Wall Street Analysts start including Waymo in Google's valuation, it would be a big development. 

Google is currently facing an Antitrust lawsuit from the US Department of Justice with proposed remedies aimed at dismantling Google's alleged monopoly in the online search market.   However Wall Street Analysts are skeptical a Google breakup will happen especially under a new Trump administration. 

Another factor to consider is Price to Earnings ratio of Google.  Google is currently trading at a P/E ratio of 26.32.  In contrast Tesla P/E ratio is 116 while Nvidia's P/E ratio is 55.42.  So I believe that Google seems undervalued compared to the other 2 Tech Giants. 

Wall Street Analysts are bullish on Google with a Buy rating, Average Target price of USD 216.75, an upside potential of 9% according to Tipranks. 

I believe that 2025 will be a pivotal year for Google as it navigates the regulatory hurdles of the DOJ Antitrust lawsuit.  However Google is well positioned for further robust growth  with new innovations and strong market share in its Search engine business, Cloud computing and its AI initiatives. 

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