Why I Think Google Stock Is a Buy

Google shares GOOGL Google reported Q4 revenue of $96.5 billion and EPS of $2.15, growing 12% and 31% compared to a year before. Shares have traded down about 10% after earnings release and here is why I think this is a good buying opportunity:

Google search continues to grow in double digits despite intensified competition from generative AI
YouTube continues to be No. 1 in streaming watch time in the US, with revenue growing 13.8%
Google cloud grew 30%, continue to be the fastest growing cloud service among the 3 major providers
Google Cloud missed expectation because of too much demand and lack of capacities. The increased capex in 2025 should resolve this issue and result in more growth.
Waymo has experienced significant growth. From its start of service in 2020 to 2023 Q4, it did 1M paid trips in total. In Q4 2024, it did 150,000 trips per week and 4M trips in total. Waymo could become the next major revenue growth driver in the near future.
The management cares about shareholders’ return. Stock-based compensation only increased 2.7% in Q4 YoY to $5.8 billion, growing slower than previous years and much less than the 28% growth in net income. Total share outstanding decreased 2% compared to last year.

The DCF estimated value for Google stock is $243.66 per share, implying a CAGR of 15%. I am using net income instead of free cash flow (FCF) to calculate the intrinsic value because the company is investing a significant portion of the FCF into cloud infrastructure, distorting the FCF growth rate to the lower end. Listed below are the assumptions used for DCF calculation:

Latest net income $100.118 billion
Net income growth rate of 12% (5YR avg of 23.8%)
Annual share repurchase of 2.29% of total shares(5YR avg 2.29%)
Future P/E of 24 (5YR avg 24.48)
Discount rate of 10%

Based on the above valuation, Google stock looks attractive at current price and I personally plan to buy more.

You can also see my past Google stock analysis using this link.

Holdings Disclosure

SoloFIRE GOOGL & GOOG ownership: 13% of portfolio
SoloFIRE GOOGL Average Cost Paid: $109
Holding time: 3 years

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DISCLAIMER: Solofire is not a registered financial advisor. This post contains author's personal opinion only and it should NOT be considered financial advice.