Google Stock Forecast 2023: Is GOOG Stock a Buy or a Sell?
Google Stock Forecast 2023: GOOG is technically bullish. Google Stock Prediction for the next 12 months is $121.4
Latest Google Stock Price
Google Stock Performance 2022
- 1 Month: +15.5%
- 6 Months: -7.2%
- 1 Year: -19.7%
The current macroeconomic scenario is in a bit of turmoil causing decreased demand for advertising. In this situation, Google is moving forward with its core goals to improve Search, Youtube, Hardware, AI, and Google Cloud as they want to be sure they are ready to tackle future obstacles. Right now, advertising revenues continue to contribute around 80% of Google revenues which can be a concern looking at the falling advertising demand.
Google Stock Forecast: Analyst Forecasts
|Average GOOG Stock Forecast for the next 12 Months||$121.6|
|New Street Research||$118|
|Evercore ISI Group||$120|
Google Stock Price Prediction for the next 5 years (Aggregated)
Google Stock Price Prediction 2023 is $138
Google Stock Price Prediction 2024 is $170
Google Stock Price Prediction 2025 is $196
Google Stock Price Prediction 2026 is $220
Google Stock Price Prediction 2027 is $257
Alphabet Stock Forecast: Technical Analysis
Google and Apple are the two FAANG stocks that have been least affected by the stock market crash in the last 1 year. Most of the tech stocks have fallen over 60% in the last 12 months but GOOG fell around 30% in the last 12 months.
GOOG is trading over 40% lower than its 52-week high price which was $152.1. Currently, GOOG is slightly above the 52-week low price of $83.45.
Performance on the Last Trading Day
- Open Price: $101.21
- Close Price: $99.21
- Gain/Loss: -1.98%
- Overall Market Cap: $1.28 T
Understanding GOOG stock WRT Technicals
The DOJ has officially opened up a lawsuit against Google for the Ad Monopoly. However, Alphabet stock closed higher on the last trading day. The GOOG stock remained below $100 despite the gains. The last time GOOG was above $100 was back on December 22nd, 2022.
The net GOOG stock price has mostly been below the 50-day as well as 200-day MA but on the above 4-hour timeframe chart, GOOG is moving above both the 50-day and the 200-day moving averages.
The first level of support for GOOG is close to the 200-day MA which is around $96. The first level of resistance for GOOG is now $105. With current momentum, GOOG is likely to test this resistance on the next trading day.
The RSI for GOOG fell from the brought territory but the support at around 56.0 has been crucial for GOOG. The RSI reversed once again after testing this support and it is likely to enter the over brought territory on the next trading day. The buyers are once again in control. The RSI for GOOG is 63.76.
The stochastic RSI is within the oversold territory. However, the Stoch RSI has broken above the 14-day SMA and it is likely to rise higher. The signal is bullish.
On the MACD chart, the MACD series proper (blue line) is on the uptrend after retesting the 9-day MA. However, the trading volume has fallen on the last trading day. A minor reversal can be noticed. The overall momentum is turning bearish.
Overall GOOG is marginally bearish.
- Moving Average: Bullish
- RSI: Uptrend (Buy)
- Stoch RSI: Over-sold
- MACD: Bullish
Google Stock Forecast Today
|1. Market's Wisdom||Positive|
|1a. Market Data||Positive|
|1b. Technical Recommendation||Buy|
|2. Crowd's Wisdom||Partially Positive|
|2a. Social Media Buzz||Higher|
|2b. Social Media Sentiment||Neutral|
Google Stock Forecast: Bull Case
Google Cloud – While Alphabet’s third-quarter results were lukewarm, there were few bright spots in the results. Google Cloud is the flag bearer from Alphabet in the red-hot cloud computing market. Google cloud revenue has been rising at jaw-dropping levels. This year the revenue has already hit $19 billion, a 39% YoY growth rate. Google cloud revenue of $24.5 billion over the trailing 12 months has surpassed IBM’s $ 22.2 billion over the same time.
The Cloud computing market is expected to grow from $405.7 billion in 2021 to $1.7 trillion by 2029 and has a CAGR of 20% over the next seven years. Google cloud is already capturing this market and is ranked third among the cloud computing companies. Alphabet also acquired, cybersecurity firm Mandiant at $5.4 billion to strengthen Google Cloud’s security and identify threats and vulnerabilities.
Although Google Cloud is not generating net positive income right now and has given a negative 10% return in the third quarter of 2022, it is growing its top line at a healthy rate and its path and its competitor Amazon Web Services is putting 30% profit margins, so there is no reason Google Cloud won’t get close to that. In 2023, Google cloud is expected to continue the dream run and turn net positive income boosting Alphabet’s revenue and profitability.
Value investors must keep valuations in sight – While the short-term pessimism is justified towards Alphabet Inc, investors should not be doubtful of its long-term value. The recent sell-off has proved to be an opportunity for long-term investors to enter afresh in Alphabet.
On both price-to-earnings and price-to-free cash flow basis, Alphabet is trading towards the lower end of 10-year values. It is only trading at 17 times forward earnings basis 16 times price to free cash flow. Another strong point is that Alphabet is generating strong free cash flow to fuel business growth. It generated a free cash flow of $63 billion in the trailing 12 months.
Google still has a firm grip on search engine domination- Google search contributes more than 50% of total revenue in each quarter. Google search has a virtual monopoly in the search engine market and according to an estimate, the engine has more than 90% market share in the majority of countries (except China). Every year not only a few hundred million people start using the internet, but the time spent by the existing users is also increasing. This means an opportunity for Google to show more ads and increase revenue. Unless something drastic changes in the search engine market, Google’s dominance should continue in 2023 and lead to constant growth in revenue.
Alphabet Stock Forecast: Bear Case
Pessimistic Ad Industry- Advertising is still Alphabet’s bread and butter and there is no denying that the growth from ads is falling. This is primarily because of inflation. When the cost of goods and services is rising, advertisers are being more careful about ad budget allocation. The more worrisome sign is that the contribution of the advertising business overall Alphabet’s revenue is almost 80% and when the ad industry is facing headwinds, there is no denying that Alphabet will also face the heat.
In the latest quarter’s earnings, Google ad contributed $54.5 billion out of Alphabet’s $69.1 billion. Also, this segment saw only 2.5% growth YoY, the slowest in the last few quarters. Also, it was the first time YouTube ad sales declined in a quarter YoY since Alphabet started to report its revenue separately in 2019. YouTube’s revenue declined about 2% YoY. There is little doubt that it is facing stiff competition from ByteDance’s TikTok
The impact of the advertising industry was seen on operating income also in the third quarter which dropped 19% YoY to $17.1 billion. The operating margin was also 25%, down from 32% in the same quarter last year. Headwinds faced by Alphabet in the advertising business are not going to slow down any time soon. With Fed increasing the interest rates in every meeting and recessing impending, 2023 can prove to be a very tough year for the advertising business and more so for Alphabet Inc.
Lack of diversification from Alphabet Inc- If we compare Alphabet Inc with Apple Inc, investors are most likely to choose Apple Inc in macro uncertain situations, because Apple has more diversified business than Alphabet. While Apple generated 79% of its revenue from selling hardware like iPhones, and iPads and the remaining 21% from its Services businesses, Alphabet generated 79% from its advertising business and only 10% from its growing Google cloud business. Alphabet’s lack of diversification in other services and overdependence on advertising is hurting its top and bottom line.
Also, a stronger dollar is hurting Alphabet as more than 50% of revenue comes internationally. Keeping 2023 into perspective, the dollar is likely to remain at a much stronger level compared to other currencies and it may thwart the company’s revenue growth.
Google Stock Forecast: Factors to look out for in 2023
- Advertising Revenues: Advertising is at the core of all Google revenues which in turn makes it a safe investment till the time this monopoly is untouched. Google uses this revenue to invest in projects that can turn into a future profit source. It enables the business to assume enormous risks that other businesses in the world cannot even think about.
- Google has struggled t this year as firms are very cutting down on advertising spending in this uncertain environment.
- With the continuously rising interest rates, we are likely to see even softer ad demand in the coming future
- YouTube Shorts monetization appears to be accelerating. YouTube Shorts have been monetized since September, and the creator income share scheme will begin in 2023. More than 700 million hours of YouTube material are seen every day, and the platform continues to overtake linear TV in popularity.
- Google Cloud: The long-term trend of cloud adoption is something that Google is capitalizing on now with its Google Cloud services showing 38% of year-on-year growth after recovering from the last quarter. In Q3 of 2022, it accounted for $7B in revenues for Google. Google also announced many products in Google Cloud Next 2022 and partnered with Coinbase, Toyota, etc even better. Since other major cloud providers like Microsoft and Amazon faltered in the most recent quarter, Google Cloud’s strong momentum demonstrates the company is moving in the right direction.
- Search Engines being replaced by Mobile Applications: The majority of Google’s ad revenue is produced through conventional search engines or the old-fashioned web browser. Google loses out every time a mobile user chooses to utilize an app over a search engine. Smartphones can search for restaurants, travel, and other services without using Google.com. Previously, Google served as the gatekeeper, but now mobile users can enter through a large new entrance.
- Android OS: Although it can compete, Google does not have the same lopsided edge against Apple and Facebook as it did over Yahoo or Bing. If Google cannot generate additional sources of revenue, stockholders will soon feel this stress.
Alphabet Stock Forecast: Valuations
Google has the highest P/S ratio of 4.0x when compared to Meta Platforms and Amazon, which are both search titans in their own right. Currently, Google is at a PE of 19.3 with an EPS of 4.7 which translates to a price of $91 as compared to where Google is right now i.e, $98. Google is also anticipated to produce $5.43 in EPS during the fiscal year 2023, translating to a P/E ratio of 17.7 X. Depending on how harsh the upcoming recession can be, Google’s earnings are at risk.
Due to those factors, Google’s stock may see short-term pressure and retest its most recent low of $83.45.Investors will be willing to pay a 13-14x P/E ratio for GOOG, which translates to a price range of $70-76 which is when the advertising demands would bottom out. This means that Google revenues will be at their lowest and the stock will be undervalued then and hence would be a great buy.
Google Stock Forecast: Ratios
- P/E ratio – 19.32
This ratio compares a company’s share price to its earnings per share. This PE is at an all-time low for Google since 2015 which means that the company is undervalued right now. The forward PE of google is around 18 which means that the company is going to get more undervalued in the coming times which can create a good buying price for the stock.
- Price to Cashflow – 14.47
It compares a company’s market value to its operating cash flow and the lower it is, the more undervalued a stock is. Looking at the historical ratio of Google in Price to cash flow, we can say that right now it is very low as compared to where it was in 2021 (19.3).
- Price to book ratio – 4.92
It is used to compare a firm’s market capitalization to its book value. P/B ratios under 1 are the ones that attract most of the value investors. There is also some gap between ROE (26.89%) and this ratio for Google which is going in line with how both these ratios are coming down along with the price.
- EV/EBITDA – 13.48
This measure is used to determine the value of a company. The best use of this ratio happens when it is compared with the industry average. It values the company, debt included, to the company’s cash earnings less non-cash expenses. Here the IT sector has a ratio of 15 and Google is at 13.48 which means it is not exactly as undervalued as the price tells us.
- Return on Capital Employed – 24.33%
This percentage is used to check the company’s capital efficiency and profitability. It can simply be interpreted as a higher value means higher the company’s profitability. In this case, Google’s ROCE has kept on decreasing since 2021 but has not taken that major a hit.
Google Stock Forecast: Q3 2022 Results
- The total revenue of the company stands at $68.45B with a YoY of 5.22%. This has been the case since the last two quarters for google where the revenue has struggled to increase significantly.
- The Earnings per Share stood at 1.07 with a YoY of -24.86%. The YoY rate of EPS has been falling for google for the last three quarters with revenues for this quarter at record lows since 2021.
- The Free Cash flows for the company stand at $16.08B with a YoY of -14.18%. This has been the case since the start of the 2022 fiscal that Google is trying to save up more cash for the upcoming times and are increasing its cash balances.
- The segment revenue details show that Google Advertising (Google Search, Youtube Ads, Google Network) contributed to 80% of the revenues of Google at $54.4B. Google Cloud contributed $7B to the revenues which is an increase of $2B YoY.
- The reliance on Advertising is nowhere near to slowing down for google which could pose some serious problems far in the future.
Alphabet Stock Forecast: Conclusion
The company will have to maintain strong fundamentals in this environment and invest in artificial intelligence and machine learning skills so as to continue to maintain the finest position in the Internet industry. This brings us to the point that Google will be at its best price on the day when the advertising demands in the globe bottom out which will directly imply Google revenues bottoming out. This will bring out the best value of Google for investors. Right now, platforms like Meta, TikTok, and Twitch are gathering a lot of consumers’ attention which might bring a shift in where the advertising market will go to in the coming future if google remains stringent in bringing any improvisation in its own platform.
However, because of the dominance of its search business and substantial cash holdings, the company continues to be wary of the uncertain macroeconomic times which will affect them and hence is trying to be ready to face them which makes Google a safe bet in the current scenario.
Google has weathered major economic storms in the past like the 2000 dot com bubble or the 2008 financial crisis and has come out of it even stronger. Google cloud is on the right track to contribute significantly in 2023 and so does the Google search engine.
The balance sheet looks very strong with strong cash flows. 2023 can prove to be a neutral year for Alphabet at worst, but let us catch the big fish while it is still below $100.
Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.