Is Alphabet In Hot Soup?🌟🌟🌟Watching $Alphabet(GOOGL.US)$Alphabet - C(GOOG.US)stock chart wasn't just painful, it was …
Is Alphabet In Hot Soup?
🌟🌟🌟Watching $Alphabet(GOOGL.US)$Alphabet - C(GOOG.US)stock chart wasn't just painful, it was brutal. In its worst single day crash in its 22 year history as a public company, Alphabet's shares plummeted by a staggering 12.6% down to USD 283.82. In a matter of hours, a mind numbing USD 480 billion to USD 500 billion in market value evaporated into thin air. It is the 2nd largest single day market cap destruction in the history of Wall Street.
Is Alphabet Really In Hot Soup?
Wall Street looked at Alphabet's Q3 scorecard and threw a historic tantrum but a closer look reveals to me that while the company is under immense short term pressure, it is far from broken.
The Cash Burn Shock:
Alphabet pushed its capital expenditure to a huge USD 51.4 billion for the quarter. It reported a negative free cash flow of USD 9.1 billion, marking its first negative cash flow loop in 22 years. This is because it is building data centres at a breakneck pace.
The Profit Drag:
Net profit fell 25% YoY to USD 26.2 billion, resulting in an EPS of USD 2.12 that missed the USD 3.02 consensus by a mile.
Why I am Still Holding Alphabet:
1. The Google Cloud & TPU Monopoly Engine
While Search decelerated, Google Cloud revenue skyrocketed by an unbelievable 103% to USD 30.7 billion. Its operating income tripled to USD 11.1 billion. Google is building its own TPUs. Even OpenAI is reportedly planning to buy Google's TPUs to run its own models.
2. Google's Deep Value of Other Bets
Waymo:
Waymo is expanding aggressively & now operates in 15 major US cities. It is planning to expand to Tokyo, Munich & even Singapore.
SpaceX:
Alphabet owns 5% of $SpaceX(SPCX.US)since 2015. It is the single largest institutional investor apart from Elon Musk. By doing so, it has hedged the future of global communications.
As Charlie Munger famously said:
The Big Money is not in the buying and selling but in the Waiting.
Long image
The copyright of this article belongs to the original author/organization.
The views expressed herein are solely those of the author and do not reflect the stance of the platform. The content is intended for investment reference purposes only and shall not be considered as investment advice. Please contact us if you have any questions or suggestions regarding the content services provided by the platform.