Google stock price on 5/12/2023Many stock market analysts are suggesting that Google and Microsoft stock looks cheap because of AI now being featured in Search. But they’re missing something pretty obvious in my opinion which is that these chatbots are going to reduce the clicks and therefore reduce the ad revenue per view. I don’t know how much extra engagement is going to result in extra revenue when you factor in the reduction of clicks expected. Therefore, this is not such an easy bet to make.

Google is still good value for a growth stock overall for those with a long investment horizon because it does so much more than just Search. But short term heading into this recession, I don’t feel confident that its stock price isn’t already reaching a ceiling for this year.

I was surprised that Google’s ad revenue was increasing over the last year and during the pandemic. I know many small publications that have lost most of their revenue and it has never come back. So there is a disparity between the giant Google and a typical media publication. Moreover, we some large media publications such as BuzzFeed and Vice now starting to fold. So there are widespread ad revenue issues being felt by individual publishers.

It seems to be Google has managed to adjust the way it makes its revenue either by displaying more ads or by changing the locations of those ads et cetera. I also know there have been changes to Adsense during the pandemic which allow publishers to show more ads. And wherever the ad revenue growth has been so far during the pandemic, if those publications have dramatically increased their ad units displayed, it could be a big part of the reason why Google is not losing revenue overall.

Google insider transactions are up 55.83% in the last 6 months. However, Google also has an RSI of 72.94. It has an expected earnings growth rate of 17.61% over the next 5 years and a forward P/E ratio of 18.85. The short float for Alphabet stock is at 0.68%.