With Alphabet (GOOGL) co-founders Larry Page and Sergey Brin stepping aside, Sundar Pichai, head of the Google unit since 2015, is taking the helm of the internet behemoth, observes Richard Moroney, editor of Dow Theory Forecasts.
Pichai will have more than his fill of legal headaches, the latest being the U.S. Justice Department’s reported decision to open a formal review of the company’s proposed $2.1 billion acquisition of Fitbit.
Alphabet also agreed to pay $327 million to settle a tax dispute with Australia that stretched from 2008 to 2018. In addition, France fined Alphabet $167 million for allegedly abusing its dominance in the search market. Alphabet promised to appeal the ruling.
Nevertheless, Alphabet’s per-share profits are expected to climb 10% in 2020 on revenue growth of 18%. The shares trade at 25 times estimated 2020 profits, in line with the median for interactive-media and services stocks in the S&P 1500 Index. Excluding net cash of $152 per share lowers Alphabet’s 2020 P/E ratio to 22.
Looking further out, Waymo is making progress toward becoming a meaningful business for Alphabet. Twelve months after launching a robo-taxi service in Phoenix, Waymo boasts more than 1,500 monthly active riders.
Last October, Waymo began offering fully automated rides without the presence of attendants in the vehicles. Alphabet is rated as buy on our Focus List of top recommendations.
