 Hey everyone, this is Dan with my first video on Alphabet Inc. which is the parent company of Google. Alphabet gets most of its revenues from internet advertising which is a fast growing segment of the world economy. Also today, Alphabet's market cap is worth $1.9 trillion. You might ask, with a company that big, how is it going to move fast and generate good returns for the investors? After doing my deep dive analysis of Alphabet, I found that the EPS of the company has been growing very fast in the last few years. Most importantly, its stock price has been growing much faster than the broad market and even faster than the rest of the fang stocks which makes it a very good investment choice. Let's get into the details. This is a list of all the businesses Alphabet is engaged in. Of course, the most important part of the business is the internet Google search engine and also YouTube, that's where they derive most of their advertising revenues. In addition, they've been doing extremely well with Google Cloud and of course they're famous for their artificial intelligence capabilities as well as the new development in autonomous driving. Obviously, their profit is generated from their internet services. We'll talk a little bit more about that later. Let's look at how the stock price has been trending in the last year. This candlestick chart is Alphabet and I plotted Alphabet together with the rest of the fang stock. For example, Facebook is here, Alphabet went up by 89% in the last year, Facebook went up by 43%. Nearly as good as Alphabet and then QQQ representing the movement of NASDAQ 100 went up by about 37%. SPY representing the movement of Standard & Poor 100 went up by about 32%. Apple went up by also about 32%. Netflix went up by only 21% and Amazon went up by 13%. So among all these stocks, Alphabet definitely is the best. If you look at the three-month chart, Alphabet also ranks very high up there, only second in Netflix. Alphabet went up by a whopping 14.8% just in the last three months. I've been looking at the 10K report for Alphabet for the year 2020 to check out some of the most important financial figures. If you look at their revenues and net income, certainly their revenue has been growing steadily, but most importantly, I want to look at the revenues they derive from different segments. Looks like Google services is by far the largest chunk of their revenues and it's been growing steadily, but Google Cloud has been growing very fast also. Basically, the revenues have been growing more than 50-60% a year in the last couple years and then if you look at the operating losses profit, you can see that they generate profit definitely from the Google services, which largely has to do with advertising and Google Cloud is still being losing money in spite of the growing revenues and looks like they might be breaking even within a year or two for Google Cloud, which would be good news and then they have other bets, which include all the other business ventures they are in. If you look at their revenues by geographic region, they definitely derive most of their revenues from the United States, which is about 47% as of 2020, and EMEA, which includes Europe, Middle East, and Africa, makes up 30% of their revenues, which is quite substantial. Asian Pacific region, 18%, and then other Americas, 5%. This is a chart showing the advertising market share in terms of revenues for the United States. The pink bars here are Google. As you can see, their market share has been growing steadily since 2015, and now it's around at least about 30-32%. Facebook's market share has been growing also, although Facebook market share is still smaller than Google's, and then if you look at Amazon, they've been growing as well, but it's a very small slice, and then the gray area is the other advertisers. If you look at the worldwide market share for search engines, definitely Google search dominates here in this area. They make up at least 85% to 90% of the market share, and the rest of the search engines, such as Bing, Microsoft, Yahoo, Baidu, and Yangdex, that's apparently a Russian search engine. Their market shares are quite small compared to Google's market share. Let's take a closer look at the financial figures. These charts are generated from the Better Investing Stock Selection Guide database, SSG database. This is the chart showing their sales compared to their stock price and EPS. As you can see, when the EPS and sales go up steadily, their stock price also has been going steadily in the last few years. Although in the last couple quarters, EPS seems to be picking up very rapidly, and we don't see nearly the same steep upward trend with the stock price. And that to me means that later on, if the EPS trend continues, we will possibly see the stock price picking up even more to be in pace with the EPS increase. And this is the chart showing the debt to capital ratio compared to the out-of-fang stock. I listed Facebook, Apple, Amazon, I did not list Netflix, Google, or Alphabet. The debt to capital ratio is way down here, very low, comparable to Facebook, whereas Amazon is way up here, not surprisingly, because Amazon needs to have a lot of capital investment for warehouses and their shipping system and so on. Basically, Google and Facebook are in very good shape in terms of debt to capital ratio. If you like what you've seen so far, I'd like to encourage you to click the like, subscribe, and notification button that will enable to receive notification when I publish my next video. It will also encourage me to make more videos like this in the future. Thank you very much. Let's continue. Let's look at another chart, and that's a chart showing Alphabet's sales. As you can see, the sales have been trending up steadily in the last seven, eight years. If you extrapolate into the future, looks like they'll be growing at least at a 20% rate for sales. They compare relatively the same with Facebook, Apple, and Amazon, although Facebook seems to be growing a little bit faster in terms of sales. If you look at EPS, again, the black line is Alphabet. If you extrapolate the EPS into the future, looks like they'll be growing somewhere between 23% to 34% a year, which is very impressive, and they compare also pretty well with Facebook, Amazon, and Apple. Just remember this 23% figure, which is a conservative figure for EPS, because we'll be using that number for our calculations in the next couple of minutes. On April 27th, Alphabet announced that they would be spending $50 billion for stock buyback. If you look at the history of stock buyback, which is very impressive, the latest quarter, the second quarter of 2021, they spent $12.8 billion buying back stock. A quarter before that, they also spent, looks like, more than $10-11 billion buying stock. For the $50 billion of stock buyback, that's 2.6% of the market cap. That means the stock price should at least go up 2.6% because of the stock buyback. Of course, the stock price has gone up a lot more than that because of various reasons, and this is one of the reasons why the stock price has been going up for Alphabet. It's a bullish sign. Let's look at my own evaluation of the company. First of all, I list the fang stocks and show their market cap, trailing P4P, and PEC ratio. You might notice that according to Yahoo Finance, the PEC ratio of Alphabet is a very low 1.2, which is a very favorable number. Going forward, I assume an earning growth of 23%. Remember that chart we showed previously, 23% is a low-end number, which is very conservative because if you look at the chart, they could potentially grow at probably even up to 34% annual growth for EPS. And then the forward P ratio, I assume a number of 27, which is conservative compared to all these other numbers. And then based on their current earnings and market cap and stock price, I extrapolate their stock prices for 2021, 2022, and 2023 based on these assumptions, and I got a stock price of between $2,800 and $4,300. And from this range, I decide to set my target to $3,200 a year to be achieved by the end of March, 2022, and most likely the price will exceed this target. A surprise continues to move up. I will revise my target upwards. Let's look at the other analyst's opinions. For today, September 15, Alphabet closed at $2,887, and my target is $3,200. Yahoo Business gives them a buy rating, $1.6 out of 5, which is pretty good. The high target is $3,425, Average $3106, Low $2,700. Louis Navalier really likes them, gives them an overall rating of A, and it's a strong buy. As you can see, my target of $3,200 is just about around the average target here, and that's why my target is rather conservative at this point. Again, I will most likely revise it upwards in the next few weeks. I don't want to give the impression that Google is invincible, even though it's a very successful, very well managed company. They do have a major weakness, which are the lawsuits filed against them. Currently, Alphabet is preparing to fight in court the $5 billion fine imposed on them by the European Union for their alleged monopolistic behavior, and actually, EU has imposed a fine of $2.7 billion in 2017, another $5 billion in 2018, and then another $1.7 billion in 2019. Now, Alphabet has not paid any of these fines yet, however, they have set aside the money in their income statement, and therefore, if they do end up paying these fines, it's not going to impact their EPS, however, any outcome that's negative to Alphabet will most likely affect the valuation of the stock price. As of October 20, 2020, the US Justice Department also filed lawsuits against Google alleging their monopolistic behavior, and these are the different bullet points listed by the Justice Department about the lawsuit. You can look at that by freezing the frame. I don't want to take up your time reading every single word here. And it's reported that the European Union is probably not going to be able to impose any tougher measures on Alphabet because it's an American company and that has to do with the bilateral trade between EU and the US, and the EU looks like it's not going to do something any more severe than what they have done, unless the US Justice Department is successful in their own lawsuits against Alphabet, which brings up later on another slide. But first, let's look at their financial statement for the 10K report. See, there is indeed a line item here, European Commission Fines, so they reserve a 2018 $5 billion, 2019 about $1.7 billion because of the lawsuits. So those numbers have already been deducted from their net income. If they win the lawsuit, or if they can settle for a smaller fine, then they will actually have a gain, and that will actually boost their EPS in the next couple years. And that's a very important piece of fact to know. So September 1, 2021, it was rumored that the Department of Justice is preparing to fire another antitrust lawsuit against Alphabet. Now that has not been confirmed by the DOJ yet. So I'll be monitoring the development of this particular situation very carefully in the next few weeks. Let's look at the charts. This is the daily chart. From this year, the chart showing the stock price starting from around late March and early April to September now, about the last six months, definitely the stock price has been trending up this almost perfect channel, very steadily. If you look at the RSI indicator, it peaked out here at a high value at the end of August. And sure enough, it started to go sideways, even go down a little bit. And when RSI was at this level previously, the stock price pretty much pulled back. And that's why we have this pullback, but now it seems to be bouncing back up already. For DMI, we are still seeing a bullish buy signal. However, MACD already switched to a bearish signal. Actually, because the stock price seems to be recovering, I bought some Google shares yesterday and I tweeted from my Twitter account that I made a trade. I'll show you that later. This is the hourly chart. It hit an all-time high a few days ago at 2,936 and since then it's been drifting downward and starting about four days ago it started to recover and follow this upward channel. If you look at the RSI indicator, it's pretty much steady, not overboard at this point. And if you look at DMI, it's flashing a buy signal. The MACD flashed a buy signal on Wednesday a couple days ago, but now it's pretty much neutral. Let's sum up the strength and weaknesses of Alphabet. First of all, as far as strength, they have about 90% market share internet search engine, which is a very dominating position and which is why they get into trouble with the European Union and with the US government because of potential antitrust violations. And then they have the growing market share and advertising revenues, and that's not more than 30%, and definitely that's a very important part of the company. And we see steadily increasing sales and EPS, at least the last five, six years, which is very bullish. And we are seeing 24 to 34% annual growth in EPS for the next few years based on how we extrapolate the historical earning trend. And they have quite a few very successful new business ventures, including Google Cloud, Waymo, the autopilot company, and artificial intelligence. Dear one and only witness that I see is that they have unresolved antitrust lawsuits in Europe and in the United States. And definitely I'll be watching this very, very careful. Let me recap my price forecast for Google or Alphabet. I expect them to be at $3,200 before the end of March 2022. Most likely it'll be at $3,200 way before that. And I'll be revising my target upwards as the situation continue to evolve. As of today, the closing price is at $2,887. And so at least we're looking at a 12% upward potential in the next six months. What are my strategies? First of all, I already bought some Google shares on September 16th and I'll hold most of my shares for the long term and swing trade arrest. And I'll buy more shares during dips and when it bounces from a support level or when positive news breaks out. And I will sell some shares when it drops at key resistance level or when adverse news breaks out. I will definitely monitor the progress of the lawsuits against Alphabet and any other news related to the company. And I will alert my subscribers, as usual, by way of my Twitter account if I have made any trades and if there's any important news related to Alphabet. I'd like to remind you to subscribe to my Twitter account as well as my YouTube channel. My Twitter account is DanMarketL. For example, on August 18th, I tweeted that I bought some ASML shares because it's 4% below all-time high and it seems to be recovering. And since then, I've realized around a 14% pay-per-gain already. And I bought Google shares because it's rebounding from a short-term correction due to high RSI values since September 1st. Again, if you like what you've seen so far, I'd like to encourage you to click the like, subscribe, and notification button. And as usual, I will very much appreciate your comments, questions, and suggestions. I'd like to remind you that I'm not a financial advisor. I share my stock trading strategies and my analyses for educational purpose only. If you want to buy or sell stocks, you should make your own decisions and you definitely consult with your financial advisors before you do so. This about wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.