2024-07-05 07:25:35 ET
Summary
- Google's GenAI monetization strategy has sparked a strong rally in its stock, fueled by accelerated growth in advertising and YouTube ads.
- As YouTube Shorts users continue to grow, the company is emphasizing monetization efforts, with the monetization rate doubling relative to in-stream viewing over the past 12 months in the U.S.
- Google Cloud's operating margin has been steadily expanding, and with Google Services' margin contributing, the company reached its highest overall EBIT margin last quarter since 3Q FY2021 at 31.6%.
- Total capex in FY2024 is projected to grow by 52% YoY, focusing on the Gemini foundation model and other AI infrastructure, aiming to sustain its long-term AI growth story.
- The stock is currently trading at a non-GAAP forward P/E of 24.8x, which is 4% below its 5-year average and the lowest among the "Magnificent 7."
Investment Thesis
Alphabet Inc.'s ( GOOG , GOOGL ) GenAI roadmap since early this year has fueled a strong rally in its stock. From Gemini 1.5 to AI Overviews, the company is integrating GenAI features into all its products and services. I believe that GOOGL's valuation will largely depend on the success of its AI monetization strategy, which has already shown early success in the last earnings report....
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Google: The Cheapest Stock In The Magnificent 7