GOOGL – Although management’s sentiment suggests the potential for near-term headwinds, market expectations are far too bearish, suggesting longer-term upside remains warranted

• Alphabet, Inc (GOOGL:USA)currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 16.7x Uniform P/E, implying fairly bearish expectations for the firm. While management may have concerns about the Pixel, foreign exchange volatility, and Verily, the firm’s leadership position in its space and lack of management concern about competitive or expense pressures suggest longer-term upside remains warranted
• Specifically, management may be concerned about their ability to scale their Pixel smart phone product line, and to maintain Google Home user growth at current levels. Additionally, they may lack confidence in their ability to leverage machine learning to provide a better experience for users and advertisers, and may be concerned about the impact of foreign exchange volatility on their performance. Finally, they may lack confidence in their ability to sustain strong growth in the U.S. across their segments, and to execute on its various partnerships with pharmaceutical companies through Verily, specifically ResMed and Gilead. That said, management is confident in their investment in user experience, and management also did not show concerns about expense pressures that would warrant the market’s very pessimistic expectations for ROA’ going forward. The firm maintains a leadership position in a space with continued tailwinds, suggesting market expectations are overly bearish, warranting further upside