Alphabet (Google) Stock Analysis: Fair Value & Price Targets for GOOG & GOOGL (Feb 2025)

Alphabet (Google) is a solid company with a lot of upside... but how is it looking at its current price of ~$188?

Alphabet a.k.a. Google (GOOG/GOOGL) gets routinely hyped as being massively undervalued by the value investor guys on X… they regularly compare it to Tesla (TSLA) and Palantir (PLTR) and allude to the idea that Alphabet is a steal relative to other mega-cap/big-cap tech stocks.

The reality is that Alphabet or “Google” is doing a lot of good things. They are positioned well to:

1. Achieve AGI first or second: IMO the AGI race is mostly between OpenAI and Alphabet in the U.S. right now. They likely have just as much talent and money as OpenAI (maybe more of both).

2. Become a top robotaxi company in the U.S. (Waymo): Only major competition in 2025 is Tesla. Both can capture a lot of TAM by 2035. It’s not a winner-takes-all market. The cost of LiDAR is dropping rapidly… Waymo is already L4 and makes its own in-house LiDAR.

3. Grow Gemini AI: Both among retail and enterprise. They are currently unbeatable right now in cost-performance metrics (surpassing DeepSeek). They have hinted at exploring ad-integration within Gemini.

4. Compete in quantum computing: New “willow” quantum specs dropped a while ago. It was all the hype for about a month on X and tech podcasts. This created extra buzz when all the morons thought quantum would hack Bitcoin soon as a result of Google’s new chip. It is an impressive chip BTW.

5. Grow YouTube & YT TV: YouTube has incredible moat and generates a lot of ad rev. YouTube TV is doing better than ever before (10M subscribers & 60% increase since July 2003).

6. Expand cloud computing: A segment that Google has been crushing lately is cloud computing. They are integrating AI and doing an exceptional job with growth and price/performance. I expect this trend to continue, but the competition is fierce.

7. Experiment with moonshots: Google Ventures has a lot of experimental moonshot projects in the works. Example: Vertex AI (Google Cloud’s AI/ML platform for drug discovery/healthcare — includes: MedLM, AlphaFold, etc.). They have drug development initiatives DeepMind/Isomorphic Labs and collaborate with other pharmas.

8. SpaceX ownership: Something many people forget about is that Google also owns ~6.99% of SpaceX. Since Google has a massive market cap, you shouldn’t buy Google if you want SpaceX exposure.

9. Custom chips (TPUs): Alphabet makes its own TPUs that allegedly deliver 2-4x performance improvements along with 2x cost-efficiency gains vs. GPU-based systems for AI inference tasks. It is estimated that the TPU biz along with DeepMind could be valued ~$700B in 2025. (Alphabet also rents their TPUs to other companies — rather than selling them.)

I think what Alphabet/Google hopes is: to continue generating robust ad rev (software, websites, YT), cloud computing expands, YT/YTTV grow steadily, people keep using Google Search, and Gemini AI grows in both free and paid users.

Alphabet’s nightmare scenario would be something like: ChatGPT, Claude, Perplexity, et al. dominate “search” and few people want Google or convert to Gemini (because they’re too entrenched elsewhere). Alphabet’s goal is to get more people comfortable with Gemini and offer better value for $.

Alphabet has an exceptional AI team (DeepMind) and some good offerings. I use Gemini regularly and think it’s fantastic… however, it’s still not the best and it’s still insanely filtered (zero topics tangential to politics allowed). Ask how Bitcoin might perform under Trump’s presidency and get Mutoumbo swatted.

The whole quantum computing hype jacked up GOOG stock earlier in the year… this was unwarranted, but quantum computing stocks are in a massive bubble. The market in general is hot (Shiller PE ATHs) yet the heat isn’t necessarily unwarranted.

For some reason people see the word “quantum” and must like its aesthetic and they don’t understand it… so are like: “take my money ‘cuz it’s the next NVIDIA” (or something).

Waymo is progressing well as a robotaxi company (already at L4). I’m not sold on the AI drug discovery and/or medical niche, but hope for the best.

Main Alphabet risks? Disruption of Google Search (ChatGPT, Perplexity, et al.); antitrust litigation (DOJ search case → pushing for divestures: selling Chrome, restricting Android search results, splitting ad-tech biz, forced data sharing); CapEx with uncertain ROI (planning $75B in 2025 up ~43% YoY); slowing cloud growth; consumer protection lawsuits; EU targeting all U.S. tech at random to slap big fines for European bullshit, etc.

Anyways… let’s determine whether Alphabet (GOOG/GOOGL) is a smart investment right now based on its business, risks (lawsuits/competition), valuation, and future upside potential.

READ: Autonomous Vehicle Research 2025: Who is Winning the L5 FSD Race?

READ: LiDAR: The Gold Standard for L4 Autonomous Vehicles in 2025

Alphabet (Google): FY 2024 (10-K) Highlights

DISCLAIMER: NOTHING HERE IS INVESTMENT OR FINANCIAL ADVICE.

Total Revenue: $350.0B, +14% yoy

• U.S. Revenue: +17% yoy (to $170.4B)

• EMEA: +12% yoy (to $102.1B)

• APAC: +10% yoy (to $56.8B)

• Other Americas: +11% yoy (to $20.4B)

Advertising Revenues: $264.6B, +11% yoy

• Google Search & Other: $198.1B (+13%)

• YouTube Ads: $36.1B (+15%)

• Google Network: $30.4B (-3%)

Google Cloud Revenues: $43.2B, +31% yoy (market share ~10–13%)

• Operating Income: $112.4B; Operating Margin = 32.1%

• FCF: $72.8B at ~20.8% margin

• Stock-Based Compensation (SBC): $22.8B (~6.5% of revenue)

• Forward Guidance: Management expects ~11–12% revenue growth in 2025 (consensus).

• AI & Future Bets: Waymo expanding U.S. driverless ride-hail, Gemini LLM integrated into Search/Cloud, quantum computing still early-stage.

Interpretation: Alphabet’s core search & YouTube ads remain strong (10–15% yoy). Google Cloud shows robust 30%+ growth. Operating margin topped 32%, underscoring continued cost discipline. The big question is how AI competition (ChatGPT) and new ad channels (Gemini, YouTube Shorts) will shape growth over the next 5 years.

• Source: Alphabet Investor Updates

---

Alphabet (GOOG) Stock Valuation (Feb 2025)

Googleplex Campus (Source: Google Press)

• Current share price: $188.49

• Market cap: $2.27T

• Enterprise value (EV): $2.20T (net cash ~$67.5B)

Here are 4 high-level metrics that many analysts watch, highlighting Alphabet’s strong fundamentals but somewhat elevated multiples.

I’m using these just to show you how Alphabet’s stock currently is valued… I rely on far more precise metrics when valuing this stock.

1.) Price-to-Sales (PS) Ratio (~6.3)

• With a $2.27T market cap on $350B revenue, we get ~6.3× P/S.

• Relatively high for a mega-cap but lower than some AI-hyped peers.

2.) Forward PE (~21)

• Alphabet trades around 21× forward EPS, reflecting a premium vs. broader market.

• Indicates the market’s confidence in stable high margins plus AI-driven upside.

3.) EV/FCF (~30)

• Enterprise Value $2.20T vs. $72.8B FCF → ~30×.

• Suggests investors are paying a premium for each dollar of FCF, given Alphabet’s defensible moat.

4.) Free Cash Flow Yield (~3.2%)

• $72.8B FCF on $2.27T market cap → ~3.2% yield.

• For a highly profitable tech giant, that’s moderate—better than some AI upstarts but hardly cheap.

Interpretation: Alphabet is not trading at bubble-like levels, but it’s not necessarily a steal/bargain. The market prices in robust ad + cloud fundamentals, plus optimism around AI expansions (Gemini, Waymo). If growth outperforms, multiples can hold; if AI competition pressures margins, multiples may compress.

---

Alphabet (GOOG): Bull vs. Base vs. Bear Case (2025–2030)

Source: Google Press

Included below are scenarios with approximate probabilities and potential share price outcomes (from $188.49 baseline) over a 5-year term.

These reflect the interplay of search usage trends, AI competition, Cloud expansion, and big “moonshots” like Waymo.

These are subjective but based upon data and the Alphabet-specific valuation framework I’ve created.

A) Bull Case (~25% Probability)

• Search remains dominant (low single-digit erosion by AI chat), YouTube continues 12–15% yoy, Cloud yoy ~30%.

• Waymo scales robotaxis profitably in ~10–15 major US metros.

• Gemini LLM sees widespread adoption (enterprise + consumer), with “Gemini Ads” integrated by ~2026.

• Revenue growth ~15% yoy, operating margin near mid-30s, strong buybacks.

5-Year ROI: +100–130% → stock in $375–$430 range. Rationale: Market awards a sustained premium for robust double-digit growth across Ads + Cloud + Waymo’s ride-hail revenues.

B) Base Case (~50% Probability)

• Search & Ads up ~10–12% yoy, stable share at ~85–90%.

• YouTube mid-teens growth offsetting competition from TikTok.

• Cloud yoy ~20–25%, slow margin improvement.

• Waymo expands* but mostly stays in a handful of cities, modest revenue contribution.

• Gemini helps Search & Cloud* but faces stiff competition from ChatGPT, MS Azure AI.

5-Year ROI: +50–70% → stock in $280–$320. Rationale: Healthy fundamentals, modest multiple compression, but still an attractive compounder. AI competition is real but Google remains near the top.

C) Bear Case (~25% Probability)

• Search usage dips* faster than expected to AI chat & Apple’s rumored search. Market share might fall below 85%.

• Waymo* expansions prove slow & unprofitable.

• Cloud* struggles vs. AWS + Azure, yoy <15%.

• Margins shrink* from big AI capex, push operating margin ~25%.

5-Year ROI: 0% to –20% → $150–$188 range. Rationale: AI chat disrupts traditional ad queries, leading to ad revenue stagnation. Elevated R&D spending + tough regulation = lower profits. Stock multiple re‑rates downward.

(Note: Even in a “Bear” scenario, Alphabet might not drop 50% because of diversified revenue and huge net cash. But a flattish or modestly negative return is plausible.)

---

Alphabet (GOOG) Fair Value Estimate (Feb 2025)

Using a customized Alphabet-specific valuation framework that I developed, I determined a “fair value” estimate for Alphabet (GOOG) shares in February 2025.