MSFT - Alphabet: Years Of Double-Digit Growth Ahead; Initiate At Buy
- Search and display ads are more mature businesses, but YouTube Ads, Google Cloud, Google Other, etc., are still growing at strong double digits.
- Advertising demand grows at GDP or higher, and Google has advantages in technology, consumer loyalty, network effect and platform synergies.
- Google Cloud is benefiting from the strong structural growth in sector demand, a differentiated strategy and Alphabet's unique advantages.
- We expect EBIT to grow at a 10%+ CAGR long term; Alphabet shares are trading at a 34.1x P/E, which does not include the value of Other Bets.
- Shares are at $1,899.40, and we expect an exit price of $2,818 and a total return of 61% (13.0% annualized) in just under 4 years. Buy.
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Alphabet: Years Of Double-Digit Growth Ahead; Initiate At Buy