Google’s ~50% Valuation Discount Provides A Relative Value Opportunity

JHVEPhoto It is not often I find myself buying US technology stocks, but the collapse in Google’s (NASDAQ: GOOG )(NASDAQ: GOOGL ) valuations makes a compelling case for a long position, particularly on a relative basis. After a sharp fall in equity prices and continued share buybacks, the market cap of Google has fallen by 41% from its 2021 peak. Google Market Cap (Bloomberg) The trailing PE ratio has fallen from a peak of 33x at the peak to just 18.9x, a level that was last seen in 2012. Google now trades at a steep discount to the overall market, particularly on a free cash flow to enterprise value basis, which puts Google’s valuation discount to the Nasdaq 100 at almost 50%. The sheer size of the company means future earnings growth will almost certainly be much lower than they have been in the past, but this size also comes with safety. This, together with the strong net debt position, suggests Google should perhaps be trading at higher valuations relative to the NDX and there is significant scope for relative outperformance over the coming years. On a trailing PE basis, Google now trades at a 28% discount to the […]

Click here to view original web page at seekingalpha.com