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GOOG, expecting a +30% increase in average cashflow
Current, target price USD2,239, 3,111 (+39%)

May 13th , 2021
1 minute read

Sales, seasonally slightly lower

• Sales declined seasonally by -3% in the first quarter to 55,314 million dollars, which is 5% above our forecast.
• This is after a 23% increase in the fourth quarter & brings the average quarterly growth to 9%.
• We expect average quarterly growth of 4% in this next 12 months, which brings sales to 63,902 million dollars by the first quarter of 2022.

Cashflow, average rising

• Free cashflow was lower at 13,347 million dollars in the first quarter after 17,198 million dollars in the fourth quarter.
• But that’s above the last 12 months average cashflow of 12,686 million dollars.
• We use flat investment spending of -5,942 million dollars, which with higher sales gives a higher average quarterly cashflow of 16,526 million dollars in this next 12 months.

Sales seasonally lower, margins higher & average cashflow increasing, expecting a further +30% increase, a 2.7% yield & a USD 2 trillion valuation...

Data file & model

Balance sheet, starting to de leverage?

• The net leverage of cash minus total liabilities was slightly lower at -70,460 million dollars in the first quarter from -70,607 million dollars in the fourth quarter, but up from -50,100 million dollars a year ago.
• With our forecast higher average cashflow & an equity payout of -39,752 million dollars...
• ... the net leverage will improve to -44,108 million dollars in 12 months time.

Profit, higher margins

• Net profit was higher in the first quarter at 17,930 million dollars from 15,227 million dollars on lower non cash costs &...
• ... as the cash costs ratio of net profit add non cash costs minus sales as a percent of sales improved to -63%,
• We use slightly higher costs of -64% to predict a higher next 12 months profit of 79,504 million dollars.

Value, a 2.7% yield

• GOOG net capital has increased to 91,032 million dollars from the last five years.
• At the current market value of 1,487,000 million dollars, based on our forecasts, it’s at 10.0X capital paid, 6.0X sales, 4.3X assets, 5.5X equity, with a 29.5% profitability & a 2.7% yield.
• Our cashflow forecast is 66,104 million dollars. At 1.6% with a 0.5X adjustment, gives a 39% higher target price of 3,111 dollars.