Why This Analyst Sees A Massive 44% Upside For Google Parent Alphabet's Stock

Alphabet Inc. GOOGL GOOG shares took a tumble during Tuesday’s after-hours session in reaction to the company’s third-quarter results.

What Happened: Future Fund’s Gary Black said in a tweet that Alphabet offers fairly predictable 12% annual revenue growth, which translates to 15% earnings growth.

Weighed down by the ad spending growth, Alphabet’s stock currently trades at just 15.3 times the adjusted earnings per share estimate for 2023, Black said.

Alphabet’s lowest P/E over the past decade was 14.1 times in 2013, the analyst noted. Over the past 10 years, its one-year forward average P/E was 22 times, added Black.

Applying the same P/E to the estimated EPS of $6.30 for 2023 would give the Alphabet stock a valuation of $140 per share, Black said.

This represents 44% upside from the $97.60 level at which the stock was trading in the after-hours, he added.

Black noted that Apple Inc. AAPL traded at 23.6 times the estimated EPS for 2023, with 5% revenue growth and 8% EPS growth.

That said, comparing Apple’s multiple to Alphabet’s may not be that accurate, given the different dynamics involved in their businesses. Apple has a sticky ecosystem that helps it retain and grow users irrespective of economic conditions.

Price Action: Alphabet’s Class A shares rose 1.91% to $104.48 on Tuesday but gave back 6.58% in the after-hours before settling at $97.60, according to Benzinga Pro data.

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