Analyzing Alphabet Inc. (GOOGL): A Cyclical Investor’s Perspective

PUBLISHED Apr 10, 2025, 11:06:40 PM        SHARE

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imgThe Cyclical investor's Club on YouTube

Alphabet Inc., the parent company of Google, is among the most prominent businesses in the technology sector. Corey Kramer, from the Cyclical Investors Club YouTube channel, recently shared his analysis of the stock, focusing on GOOGL ticker. In this article, we’ll break down his evaluation and the strategy behind his buy decision.

Recent Context and Market Position

  • Historical Stock Coverage: Kramer has monitored Alphabet closely over the years but refrained from purchasing due to valuation concerns. However, recent market conditions triggered a buy signal, and he included Alphabet in his portfolio.
  • Buy Video Series: Alphabet is the third buy video Kramer has released in rapid succession, signaling an opportunistic buying phase due to broader market declines.

Alphabet’s Financial Strength and Resilience

  • Earnings Growth: Alphabet has historically maintained long-term earnings growth, averaging 19% annually over the past decade. While the COVID-19 period brought a temporary surge in earnings (91% growth in one year), it was followed by a subsequent 19% decline as stimulus-driven spending waned.
  • Cost Management: Alphabet made strategic cost-cutting measures during economic challenges, such as halting campus construction and reducing workforce, which helped cushion earnings declines.
  • No Debt & Strong Credit Rating: Alphabet’s financial stability is underscored by its AA+ credit rating and debt-free status, positioning it well to navigate potential downturns.

Evaluating Valuation and Potential Returns

Kramer utilized tools like Fast Graphs to assess Alphabet’s valuation:

  • PE Ratio Analysis: Alphabet’s average PE ratio over the past decade is approximately 25. Currently, the stock trades at a PE of 17, indicating a more reasonable entry point for investors.
  • Growth Projections: Using a conservative estimate of 13% annual earnings growth, Kramer expects a potential 100% return over the next two to three years, assuming valuation reverts closer to historical averages.

Reasons for Optimism

  1. Core Business Strength: Alphabet’s dominance in digital advertising and robust cash flow generation make it a resilient business.
  2. Innovative Ventures: Beyond advertising, Alphabet invests heavily in future-facing technologies such as self-driving cars (Waymo) and quantum computing, showcasing long-term growth potential.
  3. Competitive Position: Compared to other MAG7 stocks, Alphabet offers a compelling balance of quality and value, even in a challenging market.

Considerations for Investors

  • Market Volatility: While Alphabet appears fairly valued, the stock could face further declines during a recession or broader market downturn.
  • Patience is Key: The cyclical investing approach requires waiting for attractive entry points in high-quality businesses, and Alphabet’s current pricing fits this philosophy.

Joining the Cyclical Investors Club

For those seeking guidance in cyclical investing, Kramer’s services offer valuable resources:

  • Stock Recommendations: Regular updates on buy opportunities for high-quality businesses.
  • Limit Orders: Kramer provides members with recommended price points for efficient entry into stocks.
  • Community Support: Access to discussions and insights to help investors navigate challenging markets.

Final Thoughts

Alphabet Inc. stands out as a top-tier business with strong fundamentals and innovative ventures. By applying a disciplined investment strategy rooted in historical valuation and growth analysis, Corey Kramer demonstrates how investors can seize opportunities during market pullbacks. For long-term, growth-oriented investors, Alphabet remains a strong candidate for portfolio consideration.

https://youtu.be/gXincNCwzgA?si=1D1Ej7IOfuV1p1-6

GOOGL, Buy

Alphabet Inc
Return: -1.14%

GOOGL, Buy

Return: -1.14%


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