Google is cheap

Google parent company Alphabet is one of the cheapest tech investments around, trading on a forward multiple of only 17. The company is at an inflection point, facing competition from other AI platform providers and a couple of court cases calling it a monopoly. Regulators want to see Alphabet broken up.

There are now even calls on Wall Street for the group to be split, as the sum of the parts is probably worth more than its current market cap. Google search is still the big daddy, generating most of the revenue and profits, but given the current headwinds, the market places a discount on those profits, which then gets applied to all the other businesses in the group.

YouTube is very profitable and growing quickly. If it were similarly valued to Netflix, the earnings multiple jumps from 17 to 45. The Google Cloud business generated 13% of Alphabet's revenue last quarter; as a separate business, it too could see its multiple jump from 17 to around 35. And let's not forget Alphabet's side bets of Waymo and Gemini-AI, which could get valuations similar to a start-up, with a multiple in the 100s.

This is food for thought.