Google Stock Forecast: Why Google Is Still A Strong Buy

motek 1The Google Stock Forecast article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

  • Google’s stock price is +8% since my July 24 buy recommendation. I am again endorsing it as a buy.
  • The growing $350 billion digital advertising business is a good reason to still go long on GOOGL. Google will remain no. 1 in digital advertising.
  • Subscription-based websites still use Google’s AdSense platform. I have a premium account at MarketBeat and I still see a large AdSense ad.
  • The Piotroski score of GOOGL is 7. It is a safe, highly liquid, consistently profitable, efficient, and undervalued growth stock. 

This is a follow-up thesis to my July 24 buy recommendation for Google (GOOGL). The stock price has shot up +8% since July 24 but I’m still endorsing GOOGL as a buy. My bullish recommendation is in spite of GOOGL’s already high +63.97% YTD gain. I still insist that GOOGL deserves a PT of $3,000. GOOGL has more upside potential. There is no headwind that could derail the 21.7% forward revenue CAGR of Google.

Investing Thesis

Investing in Google is still affordable. Based on the quantitative comparison chart below, GOOGL’s forward GAAP P/E is only 28.42x. This is lower than Microsoft’s (MSFT) 34.35x and Twitter’s (TWTR) 164.80. Amazon (AMZN) also has a much higher forward P/E of 66.73.

(Source: Seeking Alpha Premium)

I am comparing Google with these companies because they are all rivals in the $350 billion digital advertising and marketing industry. This industry is growing at a CAGR of 13.9%. It will be worth $786.2 billion. Google is still the no. 1 digital advertising company. It deserves a higher forward P/E, perhaps 31x. The expected FY 2021 EPS of GOOGL is $100.5. Multiply these two figures and you get $3,115.5. This is already higher than my 1-year PT of $3,000.

The quarterly EPS history chart below is hinting that GOOGL could finish 2021 with annual EPS of $100.5. Take note that GOOGL has been beating quarterly EPS estimates since Q2 2020. Q3 2021 and Q4 2021 will probably deliver EPS higher than $27. The previous Q2 ER delivered 69% year-over-year growth in revenue. YouTube’s $7 billion Q2 revenue was up 83% year-over-year. It is logical that Q3 revenue will again deliver 30% year-over-year growth.

(Source: Motek Moyen)

Growing EPS is why GOOGL has the highest grade of A+. GOOGL is a buy because its TTM net income margin of 28.57% is higher than its 5-year average of 19.94%.  Google’s current EBIT margin of 28.45% is also higher than its 5-year EBIT average of 24.15. The chart below illustrates that Google’s profitability has increased.

(Source: Seeking Alpha Premium)

Fast-Growth Attribute

The relative undervaluation of Google should be exploited. Growth potential is the no. 1 factor when evaluating the investment quality of stocks. You should go long on GOOGL because its forward revenue CAGR of 21.77%. This is higher than MSFT’s forward revenue CAGR of 14.70%. Going forward, the inability of Microsoft to challenge the search engine and browser dominance of Google means GOOGL will always have a higher revenue CAGR.

(Source: Seeking Alpha Premium)

Microsoft’s digital advertising future is not impressive when you consider Bing and Edge’s market share is way behind that of Google Search and Google Chrome. LinkedIn is also still not an efficient advertising platform. If it were so, LinkedIn would be a 100% free-to-use, ad-supported social network platform like Facebook (FB) is now. Up to now, LinkedIn is still bugging to renew my Premium account at $19.99/month.


(Source: LinkedIn.com)

The digital advertising robust tailwind of Google is safe because all websites I visit now will not let you in if you do not disable your ad-block browser extensions.

(Source: Inquirer.net)

I already have a premium subscription from MarketBeat. The homepage of MarketBeat still displays Google display ad. Website owners apparently still rely a lot on Google Ads.

(Source: MarketBeat Premium)

Google Is A Safe Investment

The Piotroski score is an easy way to check if a company is a safe investment. As per the chart below, GOOGL’s Piotroski score is 7 or good value stock. An excellent score would be 8 or 9. Dangerous would be a score between 0 and 2.

(Source: Finbox.io Premium)

Google Stock Forecast: Conclusion

The relative undervaluation, high profitability, and 21.77% forward CAGR of GOOGL make it a strong buy. Like it or not, Google will persist as the no. 1 leader of the $350 billion digital advertising industry. My buy rating for GOOGL is in line with its bullish algorithmic forecast. The AI algorithm of I Know First gives GOOGL a one-year forecast score of 194.06, with a predictability grade of 0.66.

Technical Indicators are also aligned with the bullish I Know First algorithmic forecast for Google.

(Source: Investing.com Premium)

Past Success With Google Stock Forecast

I Know First has been bullish on GOOGL’s shares in past forecasts. On our June 29, 2020 premium article, the I Know First algorithm issued a bullish Google stock forecast. The algorithm successfully forecasted the movement of GOOGL’s shares on the 1 year time horizons. GOOGL’s shares rose by 79.86% in line with the I Know First algorithm’s forecast.

Google Stock Forecast on June 28 2020

Here at I Know First, our AI-based stock forecast algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. The database used is 100% historical data free from human-derived assumptions and is constantly evolving with newly added data and adapting to changing market situations. Today, we are producing daily forecasts for over 10,500 assets such as forex forecasts, as well as gold predictions, while also providing the latest Apple stock news. These forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the best investment opportunities in the market.

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