BY MARK SEBASTIAN
December 16, 2024
Let’s look at the PE’s of the other major stocks in the Mag 7
AAPL: 40.61!
AMZN: 49.35
META: 29.17
MSFT: 37.06
NVDA: 54.89
TSLA: 116.47
For how huge these companies are…their PE’s are extremely high….but if we assume we are in a super cycle for technology….GOOGL is a steal.
Now remember this company had a massive breakthrough in quantum computing this week…
Its PE….25.59
They own search…they own video with youtube….they are a major player in the data center business.
They have a lot of profitable businesses that are growing…notably youtube and youtube shorts.
GOOGL has had some real bumps with its AI…its 1st try BARD flopped…the newer one looks promising…but…again…so far outside of producing Elf on the Shelf photos I am still not sure where AI goes…is it good for search or bad….
If its bad GOOGL has a dying business if they dont get AI right….now is the company going to go away…no.
Youtube is going to be around a very very long time.
They have almost no debt
12 billion is not a lot when your company is worth 2.4 trillion.
My take…when I look across the mag 7…this one has the most upside.
Alphabet (Ticker: GOOGL) has had a wild week.
And it follows my pitchfork very well:
Before the $7.00 gap opening on Tuesday, it stopped right at my resistance line.
As it gapped open, it honored the support of the top of my pitchfork and the high of that day hit resistance at another pitchfork.
Wednesday brought another 5.5% rally blowing through the previous high in July at $191.41.
Thursday’s action brings the stock down to retest that all important support/resistance level at $191.41,
A close above or below this level will signal the next direction.
Right now GOOGL looks to be bull flagging.
The red median line comes in at $200 on December 27th.
A close below $191.41 will take the stock down to $185.64.
The relative strength index has curled down below 70 but as long as GOOGL continues to close above that 191.41 level I think it will rally to $200.
GOOGL volatility at a historic spot
What is funny is that for the 1st time in a while GOOGL has a story. Some spiffy quantum computer that no one knows how to make money yet with but that does not matter in the AI era. All upside is infinite.
Normally GOOGL as a stock does not do much and IVs trade at premium to underlying volatility. Right now that is not the case. GOOGL is moving like a house on fire since the election. Note the period below on the left versus the period below on the right. Option prices, the red line, are near 1 year lows relative to the underlying movement. That sets up for great option buys.
We had a nice two-way trade last week in GOOGL where 1 student grabbed almost 1000% gain on a call. I think the opportunity for buying options is still there as the Orange Santa Rally kicks into higher gears.
They said Google was falling behind in the AI race. They said Google would lose market share to ChatGPT Search. They said Google was in danger of being broken up. Google didn’t care, because it had an ace up its sleeve….the Quantum Leap!
Don’t count out one of my favorite companies. Yes it faces competition, but its franchises are killing it. YouTube is one of the greatest assets in the world, its cloud business is strong, Waymo is quietly expanding its autonomous driving footprint.
This company laughs at companies that are now “discovering” AI…. Google practically invented the concept of monetizing AI 15 years ago! It has been amassing a gagillion pieces of our data for decades, and that pile of gold is almost impossible for anyone else to replicate. That equals new potential revenue streams for untold years to come. You may not realize it but most of the time if you’re on the internet you’re either in or very near Google’s vast ad ecosystem.
And now… Google is making big waves in quantum computing. The sky’s the limit. All I know about quantum computing is that the cat can be both IN the box and OUTSIDE of the box at the same time. How? I don’t know but guess what, I can easily Google it to find out.
So, they might be wrong. And as an income trader I have some ideas on how you can take advantage…
The stock has had a nice little run here and while I think it could go higher eventually, I’m noticing that upside calls are being priced very generously. In fact more generously than we’ve seen in years versus the puts. I can sell a Jan3 205 call for around $1.90 which gives me almost 1% in cash-flow and a call-away return of about 6% should Google fly through the 205 strike by expiry. Not bad for 3 weeks of work.
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