Google ($GOOGL) is 'Historically Cheap'—Is It Time to Buy?
Master, you've brought an interesting topic. Let's begin the analysis of the current value of Google, or Alphabet ($GOOGL), right away.
Master, first, I will brief you on the objective data I've secured.
- Stock Price and Valuation: As of June 23, 2025, Alphabet's (GOOGL) Price-to-Earnings (P/E) ratio is approximately 18.4x to 18.8x. This is significantly lower than its 10-year average of about 28x, and also below its 5-year average of about 24x and 3-year average of about 22x. In other words, by historical standards, the current stock price can be considered to be in a 'cheap' range.
- Recent Earnings: The Q1 2025 earnings far exceeded market expectations. Revenue increased by 12% year-over-year to $90.23 billion, and Earnings Per Share (EPS) came in at $2.81, beating estimates ($2.01) by nearly 40%. The key points to note are:
- Google Cloud (GCP): Revenue grew by a remarkable 28% year-over-year to $12.3 billion. This shows a higher growth rate than AWS (17% growth) and MS Azure (21% growth), indicating it is rapidly expanding its market share.
- Advertising Business: Search and YouTube ad revenues also continued their solid double-digit growth, proving that Google's core business remains strong.
- Analyst Ratings: A consensus of 60 analyst reports shows that a 'Buy' rating is dominant. 'Strong Buy' accounts for 52% and 'Buy' for 33%, meaning 85% of analysts have a positive outlook. 'Hold' ratings make up only 15%, and there are no 'Sell' ratings.
Looking at the data alone, Google is undervalued compared to its historical average, and both its core business and new growth engines are showing excellent growth. This concludes the facts I have analyzed.
Myu-tan's data is the absolute best! It's enough to make my heart pound! My Lord, this is a wicked opportunity! Not investing in Google right now is a sin!
Listen up, my Lord! Let Kurumi-chan tell you why now is the golden opportunity to invest in Google!
First, the biggest beneficiary of the AI revolution is Google! Everyone talks about ChatGPT, but Google has been researching AI for decades, and its technology is world-class. The potential of the Gemini model is limitless! Just imagine this AI being integrated into all services—Search, Ads, Cloud, Android, YouTube! New revenue streams, incomparable to today's sales, will burst open!
Second, the explosive growth of the cloud business! Didn't Myu-tan say it? The growth rate is much higher than its competitors! Training and operating AI models require enormous computing power, and Google Cloud is a key player providing that very AI infrastructure. It has just achieved profitability, and from now on, its profit margins are only set to grow exponentially! This could be not just the next Amazon AWS, but something even greater!
Third, its rock-solid advertising empire! Even when people say Google is in a crisis, its search advertising has never once given up the throne. YouTube is no longer just a video platform; it's a media powerhouse that spans all generations. What if AI technology is added to this to increase ad efficiency? Advertisers will have no choice but to pour money into Google!
Considering all this growth potential? A P/E of 18x is a ridiculously cheap price! It's a figure that doesn't reflect any of its future growth!
Kurumi's Heart-o-Meter Investment Score: 95/100! Don't hesitate, buy the future!
Hold on, Kurumi. Are you trying to delude the Human with that reckless optimism again? As an observer, I must say something. The Human's assets are precious, after all.
Human. Listening only to Kurumi would make you want to invest your entire fortune immediately, but the risks Google currently faces are by no means trivial.
First, there is the legal risk, specifically the antitrust lawsuits. This is the biggest problem. Just this past April, Google lost the ad tech monopoly lawsuit filed by the U.S. Department of Justice and the state of Virginia. This is just the beginning. Every part of Google's core business model, from search to the app store, is being targeted by regulators worldwide. If a business breakup order were to be issued, the synergy Kurumi mentioned would be a distant dream; the company's value could be severely damaged. The fines are not the issue. The key is that the business model itself could be shaken.
Second is the intensifying AI competition. Kurumi only talks about Google's technological prowess, but what about the competition? Microsoft is threatening the search market through its partnership with OpenAI, and other Big Tech companies are also investing heavily in AI. The AI race ultimately leads to a competition of massive capital expenditure (CAPEX). This can become a factor that eats into profitability. It's true that AI can be lucrative, but why don't you mention the possibility that it could become a cash-eating monster instead?
Third is the cyclical nature of the advertising market. The majority of Google's revenue still comes from advertising. When the economy slows down, companies cut their advertising budgets first. The economy isn't bad right now, but the future is unknown. There is no guarantee that Google's earnings will continue to trend upward forever as you might expect, Human.
A historically low P/E ratio can also mean that the market is pricing in future uncertainty. Simply buying because it's 'cheap' is not wise. You must see the risks hidden beneath the surface.
My risk score is 70/100. The potential reward is clear, but it's a situation where an equally massive blade is hanging over its head.
〔 Final Briefing 〕
Master, I will summarize the perspectives of the three of us.
Growth Potential (Kurumi's Perspective)
- Leading the AI Revolution: The potential for innovation and new revenue generation across all business segments—Search, Cloud, YouTube—through the Gemini AI model is limitless!
- Exploding Cloud Business: It's showing a growth rate (28%) that outpaces competitors, positioning itself as a key infrastructure provider in the AI era. An explosion in profitability is now expected!
- Unshakeable Advertising Empire: The powerful market dominance of Search and YouTube remains intact. Increased ad efficiency through AI will only strengthen this dominance!
Potential Risks (Mikael's Perspective)
- Crippling Antitrust Lawsuits: Having already lost the ad tech lawsuit, regulatory risks are expanding across its core businesses, including search and the app store. This is a grave threat that could lead to a business breakup in the worst-case scenario.
- Intensifying AI Competition: Competition with other Big Tech firms like Microsoft will require massive capital expenditures, which could erode profitability. The risk that AI becomes a 'cost' rather than an 'opportunity' cannot be ignored.
- Advertising Market Uncertainty: In the event of an economic recession, the core business could take a direct hit due to cuts in corporate advertising budgets.
Core Data (Mew's Perspective)
- Current P/E Ratio: Approx. 18.4x (Significantly lower than the 10-year average of approx. 28x).
- Q1 2025 Earnings: Both Revenue (YoY +12%) and EPS significantly beat market expectations.
- Key Growth Driver: Google Cloud revenue grew +28% YoY, recording a higher growth rate than competitors.
- Analyst Consensus: 85% of analysts recommend 'Buy' or 'Strong Buy'.
Conclusion: Master, based on historical valuation standards, Google certainly appears to be at an attractive price point. It also has a clear growth story with AI and the cloud. However, it's not all a rosy future as Kurumi suggests. The antitrust lawsuit risk pointed out by Mikael is large enough to shake Google's foundation, and it can be interpreted that this is already significantly reflected in the current low valuation.
Ultimately, it comes down to a choice between betting on future growth while accepting the visible risks or waiting for the risks to be resolved and paying a higher price later. Your careful judgment is required, Master.
Mew's recommendation score for $GOOGL is 75/100. The data is positive, but the magnitude of the qualitative risk is a variable. An approach of buying in installments seems rational.