Google’s ~50% Valuation Discount Provides A Relative Value Opportunity


  • After a sharp fall in equity prices and continued share buybacks, the market cap of Google has fallen by 41% from its 2021 peak.
  • On a trailing P/E basis, Google now trades at a 28% discount to the Nasdaq 100, which is the first time in its history that it has been cheaper.
  • On a free cash flow basis, Google’s discount to the NDX rises to 36%, and this figure rises to almost 50% once the debt structure is taken into account.
  • The sheer size of the company means future earnings growth will slow sharply, but this size also comes with safety. Together with the strong net debt position, this suggests Google should be trading at a premium to the market, and there is significant scope for relative outperformance over the coming years.

The new building at Google Bay View campus in Mountain View, California.


It is not often I find myself buying US technology stocks, but the collapse in Google’s (NASDAQ:GOOG)(NASDAQ:GOOGL) valuations makes a compelling case for a long position, particularly on a relative basis. After a sharp fall in equity


Google Market Cap (Bloomberg)


Google Vs NDX PE Ratio (Bloomberg)


Google Vs NDX FCF Yield (Bloomberg)


Bloomberg, Author’s calculations

Disclosure: I/we have a beneficial long position in the shares of GOOGL, GOOG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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