Alphabet Inc. (GOOG): Our Calculation of Intrinsic Value

Core Insights - Alphabet Inc. is a leading technology platform with a diverse portfolio including Search, YouTube, Android, Chrome, Google Cloud, and digital advertising, dominating global search traffic and online video consumption [2] - The company benefits from strong network effects, extensive computing infrastructure, and advancing AI capabilities, maintaining a robust economic moat in the technology sector [2] DCF Analysis - The DCF model uses a discount rate of 10% and a terminal growth rate of 3%, forecasting free cash flows (FCF) from 2025 to 2029, totaling a present value of $340.4 billion [3] - The terminal value, calculated using a perpetuity growth model, is approximately $1,397.9 billion, leading to a present value of the terminal value of $972.6 billion [3] - The enterprise value of Alphabet is calculated to be $1,313.0 billion [3] Net Debt and Equity Value - Alphabet has cash and equivalents of $98.5 billion and total debt of $33.7 billion, resulting in a net debt of -$64.8 billion [4] - The equity value is estimated at $1,377.8 billion, with an intrinsic value per share of approximately $114 based on shares outstanding of about 12.08 billion [4] Conclusion - The DCF value of Alphabet is $114, while the current market price is around $316, indicating a margin of safety of -64% [5] - Despite being a highly cash-generative business with strong positions in various sectors, the stock is trading above its intrinsic value, reflecting investor confidence in future growth and AI monetization [5][6] - For long-term investors, Alphabet presents significant scale and balance sheet strength, but the current price suggests limited margin of safety, indicating that future growth may already be priced in [6]