Google Forecast to Grow at Double-Digit Rate This Year

118235247 bd835831 e735 40db b369 793df01e82d0

Googles Stock is Oversold and Trading at an Excellent Price for New Investors

One could say that the market is overreacting to the recent drop in Google (NASDAQ:GOOG) (NASDAQ:GOOGL) stock, but this is only one possible interpretation. Even though the economy as a whole is in a bad spot and advertising spending is going down, it is anticipated that Google will continue growing at a rate of at least 10 percent this year.

Additionally, the company just recently reported good earnings, and it has every opportunity to strengthen its position in the digital ad market by concentrating more on video content and launching its monetization program for YouTube Shorts in the following year in order to get an edge in the market for short-form videos.

In addition, the results of my research indicate that Google’s stock is oversold and currently trading at an excellent price for new investors. This is because the stock is currently trading at a price that is 35% lower than what it ought to be worth.

superior to the others in every way

A few weeks ago, I was feeling optimistic about Google, so I wrote an article about the company in which I predicted that it would perform better than its rivals in the digital advertising market.

I reasoned that this would be the case because Google had many advantages over its rivals. In the third quarter, Google reported earnings of $1.06 per share, which was 6.1% higher than the same period in the prior year.

Spending on advertising has decreased as a direct result of the general lack of confidence in the economy. This was a significant contributor to the fact that the company’s top-line growth came in at $1.56 billion lower than anticipated.

In contrast to Meta Platforms (META), whose revenue is anticipated to decrease from one year to the next, the most recent report reveals that Google’s revenue is still on track to increase at a rate that is greater than 10%.

This is one of the more encouraging takeaways from the study. This is due, in part, to the fact that the company is better at keeping track of its users, which in turn increases the effectiveness of the advertisements that are run by advertisers on its platform.

This issue is currently being experienced by Meta as a direct result of a modification made to Apple’s (AAPL) privacy policy, which is already having a negative impact on the performance of its advertisers’ advertisements and is anticipated to cost the company $10 billion in lost revenue during the course of this year.

Googles Business Not Affected By Regulations, Fines

But as Google’s business continues to expand, the only significant threat it currently faces comes from antitrust watchdogs in the United States and the European Union.

These groups are attempting to stop Google from operating and to break it up into smaller pieces. I had already written a separate piece about the current state of regulation and the tools that were available to regulators when this date and time rolled around one month ago.

As a result of the Department of Justice’s intention to initiate a second antitrust case against Google and Europe’s recent passage of the Digital Markets Act, which is about to put additional pressure on the company, it appears that the company will soon be subject to additional fines and restrictions.

The good news is that Google will probably challenge any fines or restrictions that are imposed on it by regulators in court, where it could take years before a settlement is reached, similar to how it fought the appeals that it just filed against the European Commission.

As a result, it’s highly unlikely that any significant issues will arise in the near future. It is safe to assume that Google’s business is not affected by anything at this time, other than a cyclical drop in ad spending caused by macroeconomic events. Therefore, investors only need to think about what kinds of “catalysts” could help Google’s stock recover from being “oversold” in light of recent events. This is because it is safe to assume that recent events have caused the stock to be “oversold.”

Investors do not place a high enough value on the advantages offered by Google.

It is expected that growth in search and video will soon become the company’s main growth drivers, which will allow the stock to recover from its current oversold state.

This will allow Google’s stock to recover from its current oversold state. Despite the fact that the economy as a whole is uncertain, it is anticipated that search will grow by 14.5% this year, to a total of $99 billion, and that it will continue to grow in the years to come.

As a result, it is one of the most reliable aspects of the digital advertising industry in general.

Given that Google’s Search and Other Business Segments increased their total revenue by 4.3% year over year in the third quarter, bringing the total to $39.54 billion, it would appear that the search business would be the one most negatively impacted by a further decrease in advertising spending.

Google Working to Gain Larger Share of Shortform Video Market

This year, Google has also begun heavily promoting its “Performance Max” campaigns for its users. These campaigns provide advertisers with more options for efficiently expanding their advertising campaigns across multiple Google platforms at the same time.

Additionally, they add more optimization tools to drive conversions, which further solidifies Google’s already dominant position in the search business. During the most recent conference call, Google’s Chief Business Officer, Philipp Schindler, made the following statement:

TikTok is currently in the driver’s seat when it comes to the short-form video market, but Google has been working hard to gain a larger share of this rapidly expanding market by promoting YouTube Shorts in the video industry.

The month of September marked the first month that the company began to generate revenue from its YouTube Shorts. During the most recent conference call, it was revealed that the product currently receives an average of 30 billion views per day and 1.5 billion users per month.

2019 is the year that Google plans to launch a revenue-sharing program with its various content creators. This has the potential to attract a large number of new content creators and generate more revenue, particularly in the event that the United States government decides to permanently ban TikTok.

Google’s Fair Value Increases by 35% According to New DCF Model

In light of these developments, the only question that appears to be left is how much the value of a share of the company’s stock could potentially increase from its current price.

My DCF model indicated that the fair value of the company was $142.44 per share prior to the release of the Q3 results in October. After the most recent report from Google failed to meet the expectations of Wall Street, I adjusted my projections for top-line growth to account for the company’s underperformance, and I slightly raised my WACC to account for the change in interest rates.

Both of these adjustments were made after taking into account the impact that the recent report had on interest rates. The fact that nothing had changed was consistent with the other indications that were present.

The market currently places a lower value than it should on Google’s potential to increase shareholder value in the not-too-distant future.

The most recent version of the model indicates that Google’s enterprise value is $1.5 trillion and that the company’s fair value is $120.81 per share. This represents a 35% increase over the company’s current valuation.

To sum everything up,

Since the majority of the most significant threats are not likely to materialize within the next few years, Google has at least a few years to figure out how to comply with new antitrust rules and further solidify its position as the leader in the digital advertising market.

Additionally, the company has the potential to strengthen its position in the market for digital advertisements by introducing a monetization program for YouTube Shorts and possibly prohibiting the use of TikTok.

It is virtually certain that this would generate additional value for shareholders. Because the stock is currently trading at a 35% discount to what it really is worth, new investors may want to consider opening a long position in Google at this time because it is a potentially profitable time to do so.