Alphabet - Another global tech titan (BUY - 1600)

by Andreas Repeta
Alphabet Inc. provides online advertising services in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It offers performance and brand advertising services. The company operates through Google and Other Bets segments.

The Google segment offers products, such as Ads, Android, Chrome, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube, as well as technical infrastructure. This segment also offers digital content, cloud services, hardware devices, and other miscellaneous products and services.

The Other Bets segment includes businesses, including Access, Calico, CapitalG, GV, Verily, Waymo, and X, as well as Internet and television services. Alphabet Inc. was founded in 1998 and is headquartered in Mountain View, California.

Alphabet vs SP500


Alphabet share price, revenues, EBITDA, debt, beta & correlation
Worldwide desktop market share of leading search engines from January 2010 to July 2019
Google bing Yahoo! Baidu Yandex RU
Jan '10 90.77% 3.41% 4.12% 0.37% 0.25%
Apr '10 90.39% 3.57% 4.29% 0.42% 0.23%
Jul '10 90.59% 3.74% 3.89% 0.37% 0.25%
Oct '10 91.22% 3.47% 3.6% 0.28% 0.33%
Jan '11 90.11% 4.27% 3.96% 0.33% 0.31%
Apr '11 90.29% 3.99% 3.81% 0.54% 0.35%
Jul '11 91.01% 3.41% 3.55% 0.32% 0.26%
Oct '11 90.78% 3.54% 3.71% 0.28% 0.28%
Jan '12 91.53% 3.56% 3.33% 0.23% 0.35%
Apr '12 91.7% 3.5% 3.36% 0.26% 0.38%
Jul '12 91.17% 3.22% 2.95% 0.45% 0.34%
Oct' 12 90.73% 3.36% 2.92% 0.54% 0.37%
Jan '13 90.47% 3.19% 2.88% 0.63% 0.36%
Apr '13 90.17% 3.61% 3.08% 0.92% 0.38%
Jul '13 90% 3.86% 2.87% 1.08% 0.36%
Oct '13 87.72% 3.91% 3.26% 1% 0.39%
Jan '14 88.99% 4.04% 2.65% 0.92% 0.38%
Apr '14 88.21% 4.29% 3.34% 0.69% 0.37%
Jul '14 88.15% 4.61% 4.01% 0.55% 0.36%
Oct '14 88.73% 4.43% 3.82% 0.5% 0.41%
Jan '15 88.1% 4.53% 4.13% 0.61% 0.41%
Apr '15 88.44% 4.12% 3.67% 0.61% 0.43%
Jul '15 89.26% 3.37% 3.43% 0.79% 0.44%
Oct '15 89.16% 4.07% 3.22% 0.68% 0.53%
Jan '16 88.36% 4.85% 3.3% 0.73% 0.51%
Apr '16 89.44% 4.48% 3.1% 0.63% 0.52%
Jul '16 89.38% 4.2% 3.37% 0.71% 0.54%
Oct '16 90.37% 4% 2.95% 0.56% 0.54%
Jan '17 89.06% 4.59% 3.08% 0.54% 0.89%
Apr '17 88.56% 4.85% 3.29% 0.68% 0.75%
Jul '17 86.83% 5.13% 3.96% 0.84% 0.89%
Oct '17 87.16% 5.49% 3.72% 0.85% 0.77%
Jan '18 87.35% 5.79% 3.07% 0.74% 1.07%
Apr '18 86.28% 6.45% 3.41% 0.93% 1.21%
Jul '18 86.02% 6.55% 3.27% 1.08% 1.07%
Oct '18 90.28% 3.82% 2.76% 0.55% 1.01%
Jan '19 89.95% 3.99% 2.84% 0.56% 0.99%
Apr '19 88.47% 4.81% 3.13% 0.66% 0.92%
Jul '19 88.61% 4.98% 2.72% 0.74% 0.82%


Alphabet, formerly knows as Google Inc, is nowadays an enterprise that spans multiple divisions, ranging from YouTube, Android, Hardware and its most precious gem, the - Google search engine.

Larry Page and Sergey Brin created Google during their PhD studies, which became the first search-engine in the nascent internet-space during the tech-mania of the late 1990s.

No other search-engine has come close in competing with the Google-search engine, a fact illustrated by its total market dominance among competitors. At the forefront, lies an exclusive focus of keeping up with the latest technological advancements in the internet-space and tech, which led to the early acquisition of YouTube - today the biggest online video-platform.

Furthermore, Google's smartphone operating system - Android, is the sole competitor against Apple's OSX, leading it to enjoy a whooping 74% global marketshare. 
In the browser-space Google Chrome also enjoys a global dominance, with Apple's Safari coming out at a meere 16% against 65% for Chrome.


The continuing development of emerging market economies leads to increased internet penetration at a global scale, which will benefit Alphabet as a whole due to its global dominance of services the coming decade.  

Internet users in 2015 as a percentage of a country's population
Source: International Telecommunications Union

Higher YoY- EBITDAs, revenues and low debt are additional factors that verifies the notion of additional space for growth.

Based on these factors, we see a lot more growth for Alphabet, and the high share-price is meerily a psychological illusion, that provides no compelling argument for purchasing the share as the fundamentals and macroeconomic picture support a bullish bias.

Therefore, we give Google a target-price of 1600, until Q2 of 2020.

Profiting strategies on the future developments surrounding the stocks are numerous;

1. Purchasing a deep-in-the-money call-options with a strike at 1000$ for Alphabet, (with an expiry 1-1.5 years in to the future*) would offer substantial leverage.

2. Entering a synthetic-long-stock position by selling an ATM-put, coupled by purchasing an ATM-call, with an expiry june 2020. Hedging this position could be done via purchasing a put.

3. Purchasing the stock itself. 


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