For the highest quality technology companies like Alphabet Inc. (NASDAQ:GOOG), one would expect to pay a serious premium for the long-term cash flow generation and overall stability/growth profile of such a company. This recent market turmoil has stirred up valuations across the board, allowing investors who are looking to put fresh cash to work, access to mega behemoths like Alphabet at discount prices for those willing to take the risk.
The risks investors face with a company like Alphabet that generates most of its revenue from Google's advertising business is the potential for global corporate advertising budgets to be slashed online and otherwise as companies hoard cash to shore up balance sheets that would undoubtedly be hard hit by this pandemic. I do think there are certainly some near term risks with Alphabet's numbers over the next few quarters and potentially years in the advertising business. However, I do see a few catalysts I think they proved to be life rafts for investors looking to be saved.
Alphabet/Google is a leader in cloud computing technology, and this coronavirus has shown how important cloud computing has become for many businesses today. This growth catalyst is not going anywhere, and will only accelerate over time. Right now, Alphabet is trading at less than 20-times projected 2020 earnings, an incredibly cheap valuation for this company. Of course this valuation could drop if we see a meaningful decline in earnings, though I do think most of this downside is priced in at these levels.
Invest wisely, my friends.
Tech Insider
