Google could be the first $1 trillion company if it told us more about what it does (GOOG, GOOGL)

pulse

February 5, 2018 6:16 PM

It would have to start being more transparent about its other bets to make that happen, though.

Google could be the world's first trillion dollar company.
It would have to start being more transparent about its other bets to make that happen, though, according to Morgan Stanley analyst Brian Nowak.

Google isn't just a search engine anymore.

In fact, the company is now so diversified and eclectic that it renamed itself Alphabet, and almost has too many divisions to keep track of. If Google, and its parent Alphabet, would provide more details about how its vast array of businesses are doing, it could be the world's first trillion dollar company, according to Brian Nowak, an analyst at Morgan Stanley.

"As seen with other tech companies (AMZN, MSFT), clearer recurring disclosure can enable investors to better understand and value underlying business drivers and opportunities," Nowak said. "Our sum of parts work speaks to how disclosure could drive GOOGL toward ~$1,400 per share (~$1trln in equity value)."

Alphabet's current market cap sits around $726.07 billion. Google represents about $410 billion of that, Nowak estimates. YouTube is worth about $160 billion, bringing the total to $570.

Add an estimated $45 billion of value for Google's Cloud platform, and about $75 billion for its self-driving car efforts at Waymo and you end up with about $690 billion of market cap, according to Nowak. That leaves just $36 billion of value for Alphabet's other assets, like Google Fiber, Google Play, Verily, DeepMind, X, venture capital units, and hardware units.

Nowak says $36 billion of value is too little for those assets. At Nowak's valuations, Alphabet should be worth $978 billion and would have no problem growing its business to the $1 trillion mark.

Now, Nowak doesn't think Google will start breaking out its financials by each of these divisions any time soon, which locks away value, according to Nowak. Because of that, Morgan Stanley's price target is currently $1,200. Morgan Stanley rates the company a buy.

Alphabet is up 2.36% this year.

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