alphabet inc Google WELL Stocks fell during Tuesday’s after-hours session in response to the the company’s third quarter results.
What happened: Future fund‘s Gary Black said in a tweet that Alphabet offers fairly predictable 12% annual revenue growth, which translates to 15% earnings growth.
Burdened by growth in advertising spending, Alphabet’s stock currently trades at just 15.3 times estimated adjusted earnings per share for 2023, Black said.
Alphabet’s lowest P/E over the past decade was 14.1 times in 2013, the analyst noted. Over the past 10 years, the average P/E for a year has been 22 times, Black added.
See also: YouTube, Google Search hit by ad slumps in Q3 – CFO foresees ‘major headwinds’ from strong dollar
Applying the same P/E ratio to its estimated 2023 earnings per share of $6.30 would give Alphabet stock a valuation of $140 per share, Black said.
That represents a 44% increase from the $97.60 level at which the stock traded after hours, he added.
Black noticed that apple inc AAPL traded at 23.6 times estimated 2023 earnings per share on revenue growth of 5% and earnings per share of 8%.
2/ $GOOD The lowest P/E ratio in the past decade was 14.1x in 2013. Over the past 10 years, the average P/E of the GOOG 1-Yr Forward has been 22x. At 22x 2023 EPS of $6.30, GOOG should be $140 +44% above its AH level. $AAPL by comparison, it’s trading at a P/E of 23.6x 2023, with 5% Rev growth and 8% EPS growth. pic.twitter.com/KPSBntvHWO
— Gary Black (@garyblack00) October 26, 2022
Gasoline Gas Take: Black may not be far off when he says alphabet should have a better multiple. The company now has many important cogs in its wheels.
That Cloud Business is good and thriving. On the earnings call, CEO Sundar Pichai announced AI as the next growth driver for the company over the next decade. Better monetization of YouTube short films could contribute to revenue as user numbers increased in the last quarter.
However, comparing Apple’s multiplier to Alphabet’s may not be that accurate considering that…
