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Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: Alphabet Inc. (GOOG).
 

Profile

Alphabet is one of the world’s most dominant technology platforms, operating a global portfolio of services spanning Search, YouTube, Android, Chrome, Google Cloud, and digital advertising infrastructure. The company controls the largest share of global search traffic and online video consumption, giving it unparalleled data scale and monetization power. Alphabet’s business is reinforced by deep network effects, massive computing infrastructure, and expanding AI capabilities across consumer, enterprise, and cloud workloads. With strong recurring cash flows, a fortress balance sheet, and leadership in foundational AI models, Alphabet maintains one of the widest economic moats in the global technology sector.
 

DCF Analysis

Inputs:

Discount Rate: 10%
Terminal Growth Rate: 3%
WACC: 10%

Forecasted Free Cash Flows (in billions USD)

2025: $75.0 → PV: $68.2
2026: $80.0 → PV: $68.2
2027: $85.0 → PV: $68.1
2028: $90.0 → PV: $68.0
2029: $95.0 → PV: $67.9

Total Present Value of FCFs = $340.4B

Terminal Value Calculation

Using perpetuity growth model with 2029 FCF = $95B:

TV = (95 × 1.03) ÷ (0.10 − 0.03) = $1,397.9B
Present Value of Terminal Value = $972.6B

Enterprise Value

Enterprise Value = 340.4B + 972.6B = $1,313.0B

Net Debt

Cash & Equivalents: $98.5B
Total Debt: $33.7B
Net Debt = –$64.8B

Equity Value & Per-Share Value

Equity Value = 1,313.0B + 64.8B = $1,377.8B
Shares Outstanding: ~12.08B
Intrinsic Value per Share ≈ $114
 

Conclusion

DCF Value: $114
Current Price: ~$316
Margin of Safety: –64%

Alphabet remains one of the most powerful and cash-generative businesses ever built, with dominant positions in search, digital advertising, online video, mobile operating systems, and a rapidly scaling cloud and AI platform. However, under conservative DCF assumptions, GOOG trades well above intrinsic value—reflecting continued investor confidence in long-term AI monetization, margin resilience, and sustained growth across its core platforms.

For long-term investors, Alphabet offers unmatched scale, balance sheet strength, and optionality across artificial intelligence, cloud computing, and global digital services. Yet at current prices, the stock provides limited margin of safety, suggesting that much of Alphabet’s future growth and AI-driven upside is already priced in by the market.

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