All Aboard the Google Hype Train
Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!
This week, the biggest news in the markets was:
All Aboard the Google Hype Train!
Choo! Choo!
As the conductor of the hype train (been writing about Google again and again and again and again and again on here), all I’ve got to say is: “Welcome aboard!”
For years Google has been grotesquely undervalued despite excellent financials. For years they’ve been trading at a P/E ratio:
Cheaper than the average S&P 500 company
For years “smart money” and the geniuses on CNBC have been saying stay away from the Search giant for two reasons:
1. Google is a big bad monopoly that the DoJ is going to bust up
2. ChatGPT and other AI models are going to kill Google Search
A little crazy when you think about it. The owners of YouTube and Cloud are stock market toxin because:
1. They have no competition
2. They have too much competition
That is some “We were always at war with Oceania” Trumpian logic.
Well, this week a judge put an end to item number one on the “don’t buy an exceptional company at a great price list” and the hype train was on!
Why did they avoid having to be broken up or sell off Chrome or… checks notes… stop paying $20B a year to Apple to be the default browser on iPhones?
Because of item number two on the “don’t buy an exceptional company at a great price list.”
The judge basically said, you don’t have a monopoly if you have all this competition. Who knew?
The Mehta man lists right out ChatGPT, Perplexity, and Claude as competition to Search.
Ironically, the “ChatGPT will be the death of Search” narrative is what won them the case!
Good times.
But the “death of Search” fable gets weaker and weaker as time goes on.
Every quarter ChatGPT gets a little older.
Every quarter Search keeps growing revenue at double digits.
How soon before they start putting a dent in Google’s financials?
“I told you ChatGPT would beat out Search!”
But now we’re seeing some former haters flip-flop and hop on the hype train.
Deepwater dumb dumb Gene Munster?
Welcome aboard!
A few months ago this Voldemort-looking hedge fund manager was on CNBC saying Google was the next eBay.
What is he saying now?
Ah yes, the worst Gene in the Munster family has just now figured out the tech giant and world’s most profitable company is pretty good at this whole tech thing.
But Munster wasn’t the stinkiest take out there. Enter Steve Jobless, the caterpillar-eyebrowed so-called research analyst Ben Reitzes.
His main point was that Google is going the way of Kodak after the digital camera.
This was March after Google had just posted full-year 2024 results of 12% total revenue growth and 30% cloud revenue growth, as they put it, “across core GCP products, AI Infrastructure, and Generative AI Solutions.”
Ben Reitzes been wrong’zes ’bout Google.
I listened to this segment a couple of times and giggled to myself because the fire-flames take is just so bad.
When asked about Google’s AI, Gemini, he said this:
“With all due respect, it doesn’t matter… Are you Gemini’ing stuff (laughter)… Kodak had the best digital cameras too. Every six months they came out with one that topped Canon. It didn’t matter.”
Doesn’t matter what Google does. It is over, folks. ChatGPT has already murdered Search.
Google as a company is now dead.
Narrator voice: They weren’t dead.
These guys are the institutions. They are what is known as “smart money.” And the “smart money” has been staying away from the company that is growing their earnings at 22%.
The “smart money” has had their finger on the pulse of how ChatGPT is killing Search… which continues to grow at 12%.
But this week we’re starting to see some “smart money” smarten up about Google. So welcome aboard the hype train to the smart money. Us dumb money folks have been here a while.
Think you’re too late to hop on?
Even after the surge this week GOOG is still at 23 FWD P/E, making it cheaper than the average S&P 500 company and the least expensive of the big tech companies by a wide margin.
Choo! Choo!
Final Thought
“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett
