What tighter regulation might mean for Google’s all-conquering advertising business.
UE-GOOGLE
Valuing Alphabet, Google’s holding company, requires multiple hats. There are many moving parts to consider as well as a lot of negative headlines.
My preferred method of analyzing Alphabet’s stock price is to place a reasonable value on all of the company’s non-advertising-related businesses (such as its infamous Other Bets, YouTube, and cloud-computing offering) adding to that figure its net cash and long-term investments, before finally subtracting this total from its current market capitalization. In effect what you’re left with is the implied market value of Google’s core advertising business. From this point one only has to decide what multiple they are willing to pay for the ad business’s operating earnings to see if Mr. Market is offering up a fair price for the equity.
While I am not going to go through that calculation in this article (although if you do you will find the core advertising business to be attractively valued), I want to discuss what the antitrust investigation into Google’s advertising business might mean for Alphabet’s crown jewel.