December 1, 2017

GOOGL – Market expectations are for declining Uniform ROA, but management’s confidence about Google Maps and the Pixel implies this is unwarranted

  • Alphabet Inc. (GOOGL:USA) currently trades near historical averages relative to UAFRS-based (Uniform) Earnings, with a 20.5x Uniform P/E. At these levels the market has fairly bearish expectations for the firm, which is unwarranted, given management’s confidence about Google Maps and the Pixel
  • Specifically, management is confident about the value of the addition of thoughtfully contextual information to Google Maps, and that their decision to buy the Pixel team and IP from HTC will allow HTC to better focus on their phones and other products. As such, expectations for continued Uniform Turns compression appear too bearish, and equity upside remains warranted
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