Entering text into the input field will update the search result below

Alphabet Vs. Microsoft: Valuation Vs. Business

Apr. 11, 2022 4:28 PM ETAlphabet Inc. (GOOG), GOOGL, MSFTAMZN, QUAL, SPY, AAPL, META, IRBT, WSM, WW48 Comments
StockBros Research profile picture
StockBros Research


  • During periods of uncertainty, investors need to look for high-quality stocks with reliable and reasonably predictable free cash flows.
  • Quality-factor investing is poised to outperform as we enter a mid-cycle slowdown.
  • One company has a better valuation, while the other has a stronger competitive advantage.

Abstract cloud computing technology concept

MF3d/E+ via Getty Images

During periods of uncertainty, investors need to look for high-quality stocks with reliable and reasonably predictable free cash flows. Companies like Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) will certainly be profitable

This article was written by

StockBros Research profile picture
Two bros that talk about stocks, mainly GARP (growth at a reasonable price) stocks, but we look for opportunities everywhere. We don't have a specified time horizon. We invest in a stock for as long as our thesis holds true, and get out when the facts change. In addition, we've developed market-beating algorithms with python that help us find attractive investment opportunities within our own portfolios.Website: www.stockbrosresearch.comTwitter: @StockBrosTrades

Analyst’s Disclosure: I/we have a beneficial long position in the shares of GOOG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (48)

Investrava Analytics profile picture
Thanks for interesting comparison and info
killoranf profile picture
Thanks. This was a thoughtful, informative exercise. I particularly appreciated you sharing your calculation of comparative earnings power value. I’ll use it more often, going forward. Combined with the margin of safety calcs, it provides useful information.
MR. TRANQUILITTI profile picture
Alphabet may pull a Meta at earnings.

Sub $2400 easily
@THE WHALES when making such a statement you should lay out your thesis. 16 upward revisions already. Data is pointing toward another beat.
MR. TRANQUILITTI profile picture
@Tippsology The market makes the market.
Kyle Fishman profile picture
Don't worry about valuations --- they were overvalued 10 years ago and that didn't stop them then, won't stop them now.
Ron Richardson111 profile picture
@Kyle Fishman Nope, you are dead wrong.Microsoft Revenue 2010-2021 | MSFT | MacroTrends
StockBros Research profile picture
@Kyle Fishman 10 years ago, MSFT P/E was 11. GOOG's was 22x, with high growth. Not necessarily overvalued
cbackous profile picture
Buy both. win-win
adityakhurana2 profile picture
@cbackous I agree with you, I am doing just that, buying both on dips at a reasonable price.
Investrava Analytics profile picture
Great analysis.
mwh27 profile picture
GOOG couldn't be a more obvious buy before the upcoming July 20:1 split . . .
I currently own MSFT and I'm considering starting a small position in GOOG or GOOGL.

I'm familiar with the voting rights but am interested to know if there is other reasons to buy one vs the other.

I have bought GOOG in the past, but presently, valuation favors GOOGL
@sbally4 thank you for your reply
These companies' assets don't mean anything
jakefountain profile picture
@Diogo Franco Really? GOOGL has almost $170 BIL of cash plus ST/LT investments and that means nothing LMAO!
It’s an interesting analysis but I believe GOOG’s FCF per share in 2021 is $99. Not sure how you arrived at $76 but it has a major negative effect here
@johanvdwerf I think the FCF is actually about 100. But your point is noted.
StockBros Research profile picture
@johngonole @johanvdwerf We arrived at $76 by excluding stock-based compensation from free cash flow as a way to factor in the dilution it creates without trying to forecast future share count.
@StockBros Research thank you for that feedback
excellent, well-thought-out analysis. Thanks
Tony Montana Munich profile picture
Thanks for the good article.
doobiedoo profile picture
Good article.
Like several other posters, I too own both MSFT and GOOGL. I bought 20 more shares of GOOGL today. I might buy 20 more MSFT tomorrow.
ggman profile picture
@doobiedoo 20 Share after Split or are you rich? :)

owning also both companies
ggman profile picture
@doobiedoo so ur up to 75 now? thats a nice amount gz
jakefountain profile picture
@ggman Only about 50k. I would dollar cost average in but to each their own.
Yuppp profile picture
Own both MSFT & GOOGL in nearly equal $ amounts, but have been exclusively adding to GOOGL only in the last 2 months as I tend to agree with your undervaluation thesis. Liked the deep dive valuation analysis.
MR. TRANQUILITTI profile picture
Stocks with a PE ratio over 10 are overpriced which is the case for Alphabet and Microsoft - no thanks.

@THE WHALES You must love stocks such AT&T and Citigroup since both are trading below a 10 PE. Keep buying those while I get some more big tech at a discount.
@THE WHALES you get the best comment of the day award, lol
TopperBrad profile picture
@THE WHALES PE ratios don't exists in a vacuum. What's so special about a PE of 10?
11 Apr. 2022
Great analysis but I think you completely missed the security business of Microsoft and just generalized the Alphabet's Mandiant acquisition..

Microsoft has clear edge in the profitable security business and more acquisitions could be anticipated. So, that can add upto overall MS revenue, profits, market & stock values.What say?
@369 Google buying Mandiant enables them to move rapidly into federal and government contracts. So if Google integrates Mandiant correctly I see them stronger than MS in security. MS still have the issue that many (most) will not buy security from the same vendor who provides their cloud service and OS. Same issue with AWS internal security products.
16 Apr. 2022
@Whiterabbit66 I politely disagree with you on both the aspects. Google acquired Virus total, chronicles,siemplify & mandiant till date and I haven't seen a concerted effort from Google till date in ensuring a seamless integration among its products. Mandiant is just a brand reputation fro Google which is pretty much loosing /already lost its cream talent (especially after the fireeye/madiant & trellix seperations) and would only become pricey i.e., more $$$ after Google's takeover completion.They are way behind MS in terms of having an XDR or Identity or a zero trust solution to its customers. So, it has miles to go and hence this desperate takeover.Also, MS has an established trust in US govt and has already got billions of dollars of US contracts which Google failed till date due to the fact that they never supported the US govt directly or indirectly at a large scale..All of these facts play against them.
Michink profile picture
Google is already pretty undervalued, no way it falls more than 5% from today's price
@Michink if it does back up the truck
@Michink but what about when (if?) the upcoming recession hits? That could be a 20% drop for almost everything, right?
Michink profile picture
@maxwellb71 Depends how serious the recession will be. Right now it's not even sure we'll have a recession next year. Europe is very likely, the US not so much unless the FED intends to increase interest rates above 4% which is insane to me
Interesting concept but a bit heavy on the technical data. Have both for disclosure so there is no bias but I think Microsoft is more diversified garnering size able revenue from multiple business entities. Moreover Microsoft has a corporate c,isn’t base to leverage its already growing Azure cloud based application. Finally there is a dividend of $2.48 and growing and while its yield is minimal at todays prices if you purchased as I did at $30.00 that yield represents 8.2% on the initial investment. google is a cash cow, with great products and a dominant search engine but may have some antitrust issues which is concerning. Both outstanding
Agree , got one more GOOG share to add to the collection. Hope it goes down. Where ‘s the bottom 2300-2400???
@montereymd at this point, I would be surprised to see it touch the 2400 march. We have seen quality support around 2650. I'll take the gift if it does dip to the levels you mention.
jakefountain profile picture
@Tippsology Got down to almost 2500 last month. That is where I am looking to add.
@jakefountain that it did, and I wouldn’t be surprised to see it touch 2500 again. 2300-2400 and that means things got really ugly. I would be right there with you buying at 2500. Scooping up shares all the way to July 1st.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.