Forecast: Google Will Hit $5,000 By 2025

Google isn’t just one the largest and most powerful companies in the world right now – it is also one of the most highly diversified too, with a portfolio of businesses representing a plethora of segments, many of which offer promising growth opportunities in the future.

Given Alphabet’s already dominant position in the lucrative online advertising space, it’s not unreasonable to ask whether the company can hit the fabled $5000 share mark anytime soon.

In this article we’ll examine what might drive Google to such heights and take a look at any pitfalls that might hinder that achievement along the way.

Google Search Owns 90% Market Share

There’s no doubt that Google is the leading business in the global search sector at the moment; it’s been the innovating force in search technology development for quite some time, and will be for the foreseeable future. Indeed, Google currently enjoys a market share of 90% for search engine activity across all platforms. Its moat in this regard is unassailable, and may even grow stronger with time.

Google’s search business is the company’s biggest revenue generator, bringing in $104 billion from its “search and other” segment in 2020. This figure accounts for 57% of Alphabet’s entire annual revenues, as well 71% of Google’s advertising income.

The “search and other” designator includes ad revenue from Google’s main search platforms, as well as other properties such as Google Maps, Gmail, and its Google Play app store, thus underscoring the wider strategic importance of the firm’s dominance in the search engine space.

YouTube and Cloud Revenues Soaring

Two other businesses that will play crucial roles in Google hitting that $5000 target is its video sharing platform, YouTube, and the firm’s Google Cloud wing. 

Alphabet’s YouTube segment saw revenues grow nearly 80% between 2018 and 2020, and its year-on-year ad sales increased 48.7% this year, topping off at $6 billion for the first quarter of 2021. 

Furthermore, Google Cloud had similarly high expansion rates, growing 45.7% to deliver over $4 billion in revenues during the last quarter. The cloud division is also reaping the benefits from strong customer momentum, with Google predicting it can achieve around $740 billion+ growth in the next 5 years, up from just over $200 billion over the last 5.

This is due in no small part because many of the world’s top companies are choosing Google cloud over its rivals Microsoft Azure and Amazon Web Services, with 8 out of 10 of the leading telecommunications, media & entertainment, retail, and software & internet firms opting for Google’s service this last decade.

Secondary Businesses

In addition to the stellar growth of Google’s search, video sharing and cloud divisions, it also has significant revenue generating opportunities from its portfolio of various umbrella companies too.

In fact, it’s difficult to list all the projects that Google is fostering at the minute, many of which are potentially high-growth enterprises. However, there are some moonshots that might pique investor’s interest, such as its self-driving Waymo project – which is pitched to battle it out with Tesla in the future – and its Android TV, a smart TV operating platform which also features hardware components such as dongles and set-top boxes.

Google is also at the cutting edge of many adjacent technologies, with its ownership of groundbreaking A.I. venture DeepMind, and its own quantum computing wing, which claimed to have achieved quantum supremacy back in October 2019.

Its drone delivery service, Wing, is another venture that is leading its respective pack, having been the first company of its kind to have been granted FAA certification in the U.S.

Whether all of Alphabet’s peripheral enterprises deliver high revenues in the short-term is not an issue. The simple fact that the company is innovating in these diverse sectors means that it is securing first-mover advantage for the future; and if any of them do shoot-for-the-moon and land a hit, it is all just bonus upside for investors.

Valuation: a Best-Case Scenario

Alphabet’s quarterly earnings rose from $41.2 billion in March 2020, to $55.3 billion for the same period this year.

A 34% annual increase on what were already good numbers is almost unthinkable, but even more astonishing is that Google’s net income grew 163% over the year to deliver a per share value of $26.29. Its operating margin also improved, going from 19% in 2020 to 30% in 2021.

At its present-day price, Google’s shares are trading at a forward EPS multiple of a little under 30. Revenue growth is slated to increase around 19% this year, and many Wall Street analysts expect earnings to continue to grow at similar rates for the next few years. 

Assuming there is no share dilution in the meantime, Google would need to secure a market capitalization of $3.3 trillion for its share price to double to $5000. If we take those previous growth figures at face value – and accepting that its EPS ratio remains constant – this would imply it would make that market capitalization sometime in 2025.

Risk Factors To Google Stock Forecast

So, as we can see, a $5,000 per share valuation for Google by 2025 isn’t out of the picture. But there are a few roadblocks that could hamper that process.

First, the ever-present regulatory risk facing a company as powerful as Google can never be discounted. Some figures in previous government positions have viewed Alphabet as a de facto monopoly, and there’s always some possibility that the present administration might take action in this regard.

However, even if this scenario isn’t realized, there are more initiatives the White House and other government departments can employ. Obvious amongst these are potentially onerous privacy law legislation, which, as a company that profits from targeted advertisement revenues, would hit Google’s bottom line. 

Second, Google, like most other companies, is sensitive to secular headwinds and macro-economic changes. The $5,000 per share thesis is somewhat dependent on there not being an economic slowdown anytime soon – although given that many observers predict an economic boost from the recovery of the coronavirus crisis, this possibility remains unlikely.

Final Thoughts

Alphabet is firing on all cylinders at the moment, with its core search and advertisement business flourishing, and its peripheral secondary companies performing well. As we have seen, all Google needs to do now to reach $5,000 per share is to keep growing at the same rate that current trends suggest.

Yes, there are always political risks facing an enterprise such as Google, but, especially in this technological age, the company is almost an integrated component of the national government at this point, and any aggressive action by regulators now seems unrealistic.

Google has been good to investors – and it looks like that isn’t about to change.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.