Alphabet_GOOGL

Important disclosures appear on the last page of this report.
The Henry Fund
Henry B. Tippie School of Management
Ajay Kaushik Rajagopalan [ajaykaushik-rajagopalan@uiowa.edu]
Alphabet Inc. (GOOGL) September 9, 2016
Information Technology – Internet Information Providers Stock Rating Buy
Investment Thesis Target Price $970-1100
Alphabet Inc., founded in 1998 as Google Inc., has established itself as the
leader in online search and online advertising sales. The study of the end
market demand drivers for Alphabet’s revenue suggests a 12.11% YoY growth
in revenue during the forecast horizon (2016-2020). This strong revenue
growth expectation coupled with the estimated 30% upside for the stock are
the drivers for the buy recommendation for the stock.
Drivers of Thesis
 The internet penetration is expected to increase 7% YoY globally. More users
online increase the market size of online advertisements (3,4)
 Alphabet is expected to maintain its 95% market share in Mobile/Tablet
search engine market. This market is expected to grow at 13-15% CAGR in the
next 5 years (16)
 The market for smart home devices is expected to grow at 17% CAGR and
Alphabet’s Nest series of smart home appliances is expected to ride this
bandwagon (11)
Risks to Thesis
 Facebook has made giant strides in the advertising industry. While the
growth of Facebook and other competitors have been accounted for in the
model, any significant changes to these assumptions will severely impact the
intrinsic value of the stock
 The capital expenditure for Alphabet’s ambitious projects (referred to as
moonshots) has a significant impact on the intrinsic value of the stock.
Increasing investments into moonshot projects without any returns will impair
the value of the stock
 The average revenue earned per click, measured through the cost per click
(CPC) is declining at 11% YoY due to the increased usage of mobile devices.
While a compounding decline of 5% YoY for the next 5 years has been built
into the model, any adverse deterioration will hamper the intrinsic value of the
stock
Henry Fund DCF $1025.00
Henry Fund DDM N/A
Relative Multiple $916.00
Price Data
Current Price $788.48
52wk Range $617.84 – 813.88
Consensus 1yr Target $941.00
Key Statistics
Market Cap (B) $548.18
Shares Outstanding (M) $294.84
Institutional Ownership 78.80%
Model Beta 1.28
Dividend Yield 0.00%
Est. 5yr Growth 12.11%
Price/Earnings (TTM) 30.90
Price/Earnings (FY1) 19.63
Price/Sales (TTM) 6.70
Price/Book (mrq) 4.28
Profitability
Operating Margin 26.17%
Profit Margin 22.00%
Return on Assets (TTM) 9.13%
Return on Equity (TTM) 15.01%
Earnings Estimates
Year 2013 2014 2015 2016E 2017E 2018E
EPS $19.24 $21.37 $23.78 $26.15 $30.70 $36.14
growth 18.2% 11.1% 11.3% 10.0% 17.4% 17.7%
12 Month Performance Company Description
Alphabet Inc. is a holding company whose
subsidiaries include Google Inc., Nest Labs,
Google Capital, Google Fiber Inc., Calico LLC,
Sidewalk Labs LLC, and operating divisions
that include Verily and Google X. Alphabet
Inc., which was originally founded as Google
Inc. in 1998, has its headquarters in Mountain
view, California. The main segment of
Alphabet, Google Inc., engages in internet
products such as Search, Ads, Maps, You
Tube etc. as well as Hardware products.
19.6
16.8
13.2
26.4
21.8
16.0
0
5
10
15
20
25
30
P/E ROE (%) EV/EBITDA (X)
GOOGL Sector
Source: Sentieo Edge
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
S O N D J F M A M J J A
GOOG S&P 500

EXECUTIVE SUMMARY
Alphabet Inc. is the 8th
largest Technology Company in the
world by revenue. (2) Alphabet, started as Google Inc. in
1998, has since grown to be the leader in online
advertisement sales, mobile operating systems, and video
networks. Since its IPO in 2004, the stock of Alphabet has
grown by 1439.10%. The latest 52 Week return of GOOGL
is 21.10%. Despite this significant run up in price, driven
by consistently robust double digit growth in revenue, we
believe that Alphabet is still a fundamentally undervalued
stock.
Alphabet has 70% market share in desktop search engines
and over 95% market share in Mobile/Tablet search
engines and this leadership in internet search is the biggest
driver of its online advertisement sales business. Nearly
55% of world population still doesn’t have access to even
a slow speed internet connection. This is expected to
change with trends suggesting a 7% YoY growth in the
number of internet users around the world. Despite the
increased competition for the online advertisement
business, especially in the mobile/tablet space, we believe
that Alphabet has positioned itself to continue the robust
growth that it has seen since its inception. (3,4)
After a detailed study of the end market demand drivers,
the 5 Year CAGR for revenue was estimated to be 12.11%
during the forecast horizon (2016-2020). This estimated
top line revenue growth coupled with Alphabet’s efforts to
tighten costs to prevent margin compression are the major
drivers of the DCF model used to compute the intrinsic
value of Alphabet’s stock. The model suggests a 30%
upside on the current stock price (as of September 9th
2016), which is the driver for the “Buy” recommendation
for Alphabet.
COMPANY DESCRIPTION
Alphabet Inc. is the holding company for a number of
subsidiaries, the biggest of which is Google Inc., the
world’s leading internet search provider. Founded as
Google Inc. by Larry Page and Sergey Brin in 1998, it had
its initial public offering in 2004. In its 18 years of
existence, Alphabet has grown from strength to strength
and has diversified from being an online search company
to being an innovation hub. Various teams in Alphabet are
pursuing futuristic products that aim at providing a
paradigm shift to the way humans would lead their lives in
the future.
Revenue Decomposition
Source: 10K (5)
The chart above represents the macro breakdown of
Alphabet’s revenue stream. 99% of the revenue comes
from advertising and licensing. This essentially means that
every product that Alphabet creates is essentially aimed at
increasing user engagement. Alphabet has been very
successful in analyzing the user data at its disposal to drive
its advertising revenue through strategically placed
relevant ads. Alphabet’s efforts to diversify its product line
through its investments in hardware and its futuristic
moonshot projects do not have a significant contribution
to the top line growth. During the forecast horizon (2016-
2020), the Other Bets segment of Alphabet is expected to
grow at 17% CAGR, but is still expected to contribute less
than 1% of the total revenue during the forecast horizon.
Google Inc., the largest subsidiary of Alphabet Inc. is the
driver for the advertising and licensing revenue. The
revenue decomposition for Google Inc. has represented in
the chart below:
99%
1%
Revenue Breakdown by Segment
(FY 15) (%)
Advertising & Other Revenues Other Bets

Source: 10K (5)
The chart above represents the importance of Google
websites. Contributing to nearly 71% of Google’s revenue,
which would account for nearly 70% of Alphabet’s
revenue, Google websites are by far the most important
product of Alphabet. The individual websites that
comprise the Google websites segment will be discussed
in detail in the future sections of this report.
The last aspect that will be discussed in this section is the
geographical mix of Alphabet’s revenue. It is important to
understand this as the future growth for Alphabet will be
driven to a great extent by the increasing internet
penetration around the globe. The rate of internet
penetration across the globe (7% YoY) and the end market
demand drivers for Google products suggest an increase in
the revenue contribution from geographical areas outside
of US and UK. India will be one of the biggest drivers of
revenue for Alphabet in future. The Henry Fund team
believes that the revenue contribution from rest of the
world will increase from 44% as of FY2015 to 50% as of
FY2020. India, Brazil, Indonesia, and other emerging
countries is expected to drive Alphabet’s revenue globally.
The Henry Fund team is of the view that Alphabet will not
be able to displace Baidu in China and hence does not have
good growth prospects in China.
Source: 10K (5)
Source: HF Estimates
A shift in the balance of geographical revenue mix towards
international markets will be associated with increased
forex risks. While it is true that the relative strength of the
US dollar will be a major factor in the future earnings,
these forex adjustments have not been modelled to
compute the intrinsic worth of the stock. The hedging
efforts that will be undertaking by Alphabet have been
considered sufficient to yield a net neutral effect during
the forecast horizon. Forex fluctuations are a malaise for
every multinational company and are not necessarily a
70.24%
20.17%
9.59%
Revenue decomposition of Google
Inc. (%)
Google Websites
Network Members's Websites
Other Revenues
44%
10%
46.00%
Revenue from Geographic
Segment (%)
US UK Rest of the World
42%
8%
50.0%
Forecasted Revenue Mix in 2020
from Geographic Segments
US UK Rest of the World

major force in influencing new product development and
deployment decisions.
Shares Classes and Voting Rights
Number
Outstanding
Number of
Votes
% of
Control
Class A 294.8 1 36%
Class B 51.75 10 64%
Class C 343.6 0 0%
Source:10K (5)
Alphabet Inc. bucks the conventional trend by issuing
various classes of shares each with different voting
powers. Class B shares form the most powerful share class
with each share carrying 10 voting rights. These shares are
not traded in the market while Class A and Class C shares
are tradeable in the market. Sergey Brin, Larry Page, and
Eric Schmidt own approximately 92.5% of the class B
shares, which gives them 58.5% of the voting power. This
is significant as the trio essentially have veto power and
can exercise significant control over management and all
affairs requiring stockholder approval. The Henry Fund
team is very confident in the vision that the trio have
espoused for Alphabet and it is one of the major reasons
(in addition to the potential upside) for the buy
recommendation. The Class C shares, that carry no voting
rights, are predominantly used to fund employee equity
incentive programs.
Google Inc.
Google Inc. contains Alphabet’s core operating and
revenue making products such as Search, YouTube, Maps,
Gmail, Android OS, Chrome browser, Play Store, hardware
products such as Chromebooks, phones, and tablets. The
enterprise software and productivity solutions as well as
the analytics platforms such as Google Compute fall under
the umbrella of Google Inc. Google Inc. contributes to
nearly 99.5% of the total revenue of Alphabet.
Source: HF Estimates based on extrapolation of 10K data
The chart above is very important as it highlights the
importance of Google Websites to not only the revenue
streams of Google Inc., but also the revenue of Alphabet
Inc. Moreover, Google Websites contribute the most to
the gross margin line of Alphabet as the acquisition costs
for network members, distribution partners, and costs of
hardware products are significantly higher.
Google Websites
Google websites include any Alphabet owned product
such as Search, YouTube, Maps, Finance, Shopping, Gmail,
and a multitude of other internet products.
Google Network Members
Network Members include the non-Alphabet owned
websites that display advertising from Alphabet. This
program of sharing proprietary Google advertising is called
the AdSense program. The margins associated with the
AdSense program are significantly lower than that of the
Google Websites (as shown in the graph above). This is
because of the non-Alphabet owned websites that display
the Google ads receive a share of the ad revenue.
69.78%
20.08%
9.54%
16.37%
95.41%
38.65%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Google Websites Network
Members
(Including
distribution
partners for cost)
Play Store
,Licensing ,
Hardware
Revenue and Cost Decomposition
FY15
% of Consolidated Revenue
Cost as % of Corresponding Revenue

Source: HF Estimates and historical data from 10K (5)
As seen in the chart above, the contribution to the top line
of Google segment from network members is steadily
declining and is expected to decline further during the
forecast horizon while the contribution from Google
Websites is expected to increase. This is one of the major
positive drivers for the high intrinsic valuation of stock.
AdWords
AdWords is a self-service auction based platform that
enables Google’s advertising customers to bid for key
search terms. If the customer’s bid is successful, then the
customer’s ads are displayed next to the search results.
There are two different terms that measure the click
driven revenue. They are:
Paid Clicks
This represents the engagement of users and includes the
revenue from end-users actually clicking the
advertisements shown by Google on its websites as well as
on its network websites.
Cost per Clicks (CPC)
This represents the average cost of each engagement by
users that Google charges its advertisers. The formula is:
𝐶𝑃𝐶 =
𝑇𝑜𝑡𝑎𝑙 𝐶𝑙𝑖𝑐𝑘 𝐷𝑟𝑖𝑣𝑒𝑛 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑃𝑎𝑖𝑑 𝐶𝑙𝑖𝑐𝑘𝑠
Source: 10K (5) and HF Estimates
As seen in the chart above, the click driven revenue is
increasing YoY while the average costs associated with a
click is decreasing YoY. This is because the denominator is
increasing faster than the numerator for CPC. Alphabet’s
management attributes this to variety of factors namely,
increased competition, the evolution of online advertising
market, changes in product mix, changes in device mix,
and shifts in geographic mix of revenues. While all these
factors do play a part, the Henry Fund team believes that
changes in device mix is the most important factor that is
weighing the CPC down. The proliferation of small screen
devices such as tablets and smartphones limit the area and
hence the number of relevant ads that can be displayed on
the screen. This has limited the average cost that an
advertiser is willing to pay of mobile ads thereby pulling
the CPC down. While the volume of ads is increasing YoY,
the increasing use of mobile devices has pulled down the
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2013 2014 2015 2016E 2017E 2018E 2019E 2020E
Google Websites and Network
Members
Google Website as % of Google Segment Revenue
Network Members as % of Google Segment Revenue
20%
22%
12%
-5%
-11%
-5%
-20% -10% 0% 10% 20% 30%
2014
2015
2016E-2020E(CAGR)
CPC and Paid Clicks
% Change in CPC % Change in Paid Clicks

advertisers’ willingness to pay. This is the major reason for
attributing decreasing CPC to the denominator in the CPC
calculation increasing faster than the numerator. The
Henry Fund team estimates that the proliferation of
mobile and other small screen devices will result in CPC
reduction YoY (2016-2020) at a rate of 5% while increasing
the paid clicks by 12%.
The future for Google in mobile ad space will be discussed
in detail under the industry trends section. There will be
specific forecasts for revenue that will also be discussed
under that section.
Traffic Acquisition Costs (TAC)
There are costs associated with gaining advertising
revenue that also include the revenue share that Google
promises its network members and distribution partners
for hosting Google’s advertisements. The Google toolbars
hosted in other websites also add onto the traffic
acquisition costs. The effect of TAC on margins have been
discussed in the earlier sections of this report.
YouTube
The video hosting and sharing site of Google is one of the
most popular website of Google and the most popular
video website in the world. The table below represents the
ranking of video sharing and video hosting sites based on
the user traffic.
Name of Site Estimated
Unique Monthly
Visitors
Alexa (Amazon)
Site Rank
YouTube 1,000,000,000 3
NetFlix 150,000,000 95
Vimeo 130,000,000 98
Yahoo! Screen 125,000,000 N/A
DailyMotion 100,000,000 94
Source: eBiz and Alexa (7)
Source: Statista (8)
The chart and table above shows the dominance that
YouTube enjoys among the sites that host and screen
video content. Facebook and Twitter have made rapid
strides in chipping away at the video Ad revenue pie that
Alphabet/Google enjoys. Twitter recently increased the
revenue share to video creators who host videos on
twitter to 70%. (10) Facebook and Alphabet share 55% of
the video ad revenue with its video creators. Facebook
introduced a new model for displaying videos where it
pushes videos to the timeline of users and these videos
start playing automatically with its audio muted. Twitter is
trying to replicate the same model. With each of these
companies trying to also charge advertisers based on
impressions, there will be a greater competition for video
ads in the future.
5.4
4.4
3.2
2.6
2.2
1.6
0.
1.
2.
3.
4.
5.
6.
2014 2015 2016E 2017E 2018E 2019E
YoY Growth in YouTube Users in US
(%)
YoY Growth in YouTube Users (%)

As seen in the chart above, the total video ad revenue
growth is expected to increase YoY on an average of 9%
until 2021. This indicates a growing market pie with the
revenue being pulled down due to the shift in video
consumption from traditional desktops to mobile devices.
This facet has been described earlier while discussing the
CPC trends.
YouTube Red
Alphabet is well aware of the increased competition for
video ad revenue as can be gleaned from the statements
made by the management from time to time. In October
of 2015, Alphabet launched a subscription based ad free
video streaming service called YouTube Red. YouTube Red
also enables saving videos for offline viewing. The intent
was to hedge against the forecasted slowdown in video ad
revenues and recoup lost revenue through subscription
fees. There is no information regarding the viewership and
the customer base of YouTube Red. The YouTube Red’s
original productions pale in comparison to collection of
NetFlix, Amazon Prime, Hulu, or HBO Now. The Henry
Fund team is cautiously optimistic about the prospects of
YouTube Red due to the product being in its infancy. The
YouTube Music app is part of the YouTube Red initiative
and this allows for customers to stream music ad free.
Source: Various
Nest Labs
Nest Labs was one of the many recent acquisitions of
Alphabet. The deal, which was valued at $3.2 billion, was
completed in February 2014 and this signaled Alphabet’s
entry into the world of smart home products. The major
products of Nest Labs are the smart thermostats and the
smoke and carbon monoxide detectors. Alphabet has
started reporting revenue from its non-Google segments
under the revenue from Other Bets section. Nest Labs falls
under the Other Bets segment. While Alphabet doesn’t
provide a concrete breakdown of revenue constituents in
the Other Bets segment, the Henry Fund team believes
that most of the revenue in that segment is due to the
hardware sold by Nest Labs. Based on the meta data
analysis and extrapolation of the available information,
Nest Labs seem to be a loss making division for Alphabet.
0
2
4
6
8
10
12
Netlfix
Average Price
YouTube Red Hulu Amazon Prime
Subscription Fee - Monthy
Subscription Fee - Monthy

While Nest Labs may not have turned over a profit yet, the
management team at Alphabet believes that Nest Labs will
be able to develop relevant home innovation products
that will help them ride the IoT bandwagon.
The chart above represents the likely market demand for
product lines that can be served by the Nest Hardware
products. This appetite of the market for smart home
products is the reason for assuming a 17% CAGR growth
for Other Bets during the forecast horizon. The number of
projects that are put under the Other Bets bucket makes
this assumption the least certain among all other revenue
forecasts. There are multiple moonshot projects that are
included under Other Bets and a successful launch of a
moonshot project can lead to an explosive growth in
revenue from the Other Bets segment. Some of the
moonshot projects will be discussed in the following
sections.
Calico (California Life Company)
Calico in one of the long term research and development
arms of Alphabet that aims at finding a cure for age related
diseases. In September of 2014, AbbVie Inc. joined Calico
and announced a research and development collaboration
intended to bring to market new therapies for age related
diseases, including neurodegeneration and cancer. The
latest 10K filling of Alphabet reveals that the life sciences
arm is funded for the long term. The Henry Fund team
does not expect any breakthroughs from the Calico team
0.60%
551.31%
0.00%
100.00%
200.00%
300.00%
400.00%
500.00%
600.00%
Other Bets
FY15
0%
5%
10%
15%
20%
25%
30%
35%
40%
0.
5.
10.
15.
20.
25.
30.
35.
40.
2014 2015 2016E 2017E
Inmillions
Market Demand Outlook for Smart
Home products
Smart Home Devices
Smart Home Controllers
YoY Growth for Smart Home Devices
YoY Growth for Smart Home Controllers

to hit the market during the forecast horizon. Any change
to this assumption will significantly impact the intrinsic
value of the stock as cures for age related diseases that can
significantly lengthen the human lifespan will have a
revenue potential that would far exceed the current
revenues of either Alphabet or AbbVie.
Google Fiber
Source: fiber.google.com (12)
Google Fiber is the high speed fiber network that Alphabet
provides to spur competition among existing broadband
network providers to provide faster speeds on their
networks. As shown in the map above, Google Fiber now
provides fiber optic network connectivity to 9 cities in the
US. The map chart also shows that Google Fiber has been
planned for 6 additional cities in the future. With close
1000 megabits per second speed, Google Fiber is orders of
magnitude faster than other commercially available
broadband networks.
The management of Alphabet doesn’t provide any clear
breakdown in terms of the revenue earned from its Google
Fiber initiative. What is however clear though is the capital
outlay needed for expanding the Google Fiber network to
the planned cities. $3-3.5 billion (per city) is the potential
outlay for CapEx for extending the services of Google Fiber.
This outlay has been taken into consideration while
projecting PP&E growth and sensitivities were performed
with varying degrees of growth for PP&E.
Other segments/subsidiaries of Alphabet
X, Google Ventures, Google Capital, and Verily are the
other subsidiaries of Alphabet.
Google Ventures and Google Capital are the venture
capitalist and the private equity arm of Alphabet that
invest in promising technologies and startups. Uber,
Survey Monkey and Glassdoor are some of the high profile
investments made by these arms of Alphabet. The reason
for not detailing these subsidiaries is because these arms,
while having the potential to make billions of dollars for
Alphabet through its strategic investments, do not
necessarily contribute to the operating arm of the
company. The Alphabet management has made it
abundantly clear that these subsidiaries be viewed as arms
that look out for financial returns rather than a strategic
arm that looks out for potential product acquisitions. In
this regard, the investments made by these subsidiaries
are not any different from the long term and short term
investments of cash that every company makes and hence
have been treated thus.
X (formerly Google X) is the research arm of Alphabet that
pursues futuristic ideas that include the self-driving cars,
hot air balloons beaming internet around the world
(Project loon), Project Wing that has successfully
prototyped product delivery using flying vehicles, and
various other futuristic projects. The management of
Alphabet does not reveal or breakdown the revenue
figures from any of these projects. What is however
certain is the significant outlay for CapEx for the testing
and development of these projects in addition to the R&D
expenses incurred. These costs have been incorporated
into the model while eschewing any potential for revenue
during the forecast horizon.
Formerly known as Google Life Sciences, Verily is an
independent subsidiary of Alphabet that focusses on
research and study of life sciences. One of the most
promising products under development in Verily is the
Glucose level detecting contact lenses. These contact
lenses provide an easy non-intrusive method for keeping
track of the glucose levels for diabetic patients. Other
projects include the development of health tracking
wristbands, advanced surgical robotics, and
bioelectronics. There is no clarity provided by the
Alphabet’s management in terms of the revenue
contribution of any of these projects. The Henry Fund
team will abstain from factoring in the revenue potential

of any of these projects into the model while factoring in
the costs and the capital outlays needed. This is because
almost all of these projects are disruptive technologies
that will create new markets and hence cannot be factored
in with any degree of certainty. If any of these projects are
successful, the intrinsic value of the stock will increase
drastically.
RECENT DEVELOPMENTS
Recent Earnings and Future Estimate
Source: Bloomberg and HF Estimates (13)
Source: Bloomberg (13)
Alphabet does not provide any earnings or revenue
guidance. This forced the team to use the analysts’
estimates as the reference point for comparing the
revenue and earnings forecasted by the Henry Fund DCF
model. The DCF model forecasts reveal the revenue and
EPS estimates to be lower than the consensus estimates of
all 46 analysts covering Alphabet Inc. This reveals a level of
conservatism that has been built into the Henry Fund DCF
model while modelling future sales growth. The
conservatism stems from the expected slowdown in ad
revenues as smartphone growth hits saturation. The Henry
Fund team expects the YoY revenue growth between FY 15
and FY 16 to be 13.47% as compared to analysts’
expectations of 18%. The 5 year (2016-2020) estimated
CAGR for revenue is around 17-18% band while the Henry
Fund team believes that it would be around 12-13%. The
estimates for the team are based on the study of the end
market demand drivers and its likely translation into
growth drivers for Alphabet Inc. The growth estimates
factor in decreasing revenue growth due to increasing
competition.
Increased attrition at Verily
Source: Stat news (14)
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
0
10
20
30
40
50
60
70
80
90
100
Revenue (in billions) EPS (GAAP)
Annual Estimates
Analysts Consensus Estimates FY 16 (Mean)
Henry Fund Forecast FY 16
Surpirse History Revenue and EPS (%)
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
0
5
10
15
20
25
Revenue (in billions ) EPS (GAAP)
Quarterly results in 2016
Q1 16 (A) Q2 16 (A)
Surprise History Q1 Surprise History Q1 2

As shown in the news snippet above, Verily has seen the
exodus of its top scientists, engineers, managers, and data
scientists in its 3 year history. The popular theory floating
around for this exodus is the friction that these employees
faced with the CEO Andrew Conrad. While the Henry Fund
team doesn’t wish to share its conjecture about the
exodus, it does share the view that the exodus is a matter
of concern. More attrition at Verily could significantly set
back any future product launches from Verily. This does
not bode well for the subsidiary Verily.
Glitches with Nest Products
Nest currently sells three products: a smart thermostat, a
smart fire alarm, and a smart camera. There have been
multiple reports of the smart thermostat and the smart
camera malfunctioning or facing a service outage. These
glitches have put the Nest subsidiary in the spotlight as it
looks to shake up the nascent smart home appliances
market. While the management does not necessarily
divulge the future product plans of Nest, the expectations
around Silicon Valley is that Nest would start a series of
products that would herald household IoT (Internet of
Things) revolution. These developments and the product
portfolio of Nest need to be monitored closely as any
tectonic shifts would invalidate the 17% CAGR for revenue
forecasted for Nest Labs.
Android vs iOS (Considering new device mix)
With the launch of IPhone 7 and the expected launch of
various flagship android devices (including the launch of
Google’s Pixel/Nexus series of phones), an analysis was
done on the expected market share for android vs iOS
operating systems. The chart above reveals that Android
is expected to maintain its leadership in terms of the
market share for smartphone operating systems. With 6-
9% expected growth in smartphones expected during the
forecast, it should translate to median growth of 6-6.5%
for Google/Alphabet in terms of the licensing revenue
from Android OS.
INDUSTRY TRENDS
Mobile Ad Spend Growth
Source: WordStream (16)
The 4 year CAGR (2016-2019) for US mobile search and ad
spending is expected to be around 20%. This is
represented in the graph above.
Source: WordStream (16)
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
2014 2015 2016E 2018E 2019E 2020E
Market Share by Operating
Systems
Android (%) iOS(%) Windows Phone(%) Other(%)
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
0
5
10
15
20
25
30
2014 2015 2016E 2017E 2018E 2019E
YoYGrowth
AdSpending(billionsof$)
Estimated US Mobile Search and
Ad Spending (2014-2019)
Estimated US Mobile Search and Ad Spending (in
billions)
YoY Growth (%)
95%
3% 1%
84%
13%
3%
0%
20%
40%
60%
80%
100%
Google Bing Yahoo
Estimated Share of Mobile Paid
Clicks by Device
Smartphone Tablet

Mobile ads have an estimated CPC that is 24% lesser than
that of desktops, but have a Click Through Rate (CTR) that
is 40% higher than that of desktops. (16) With over 95% of
the mobile ad market share, Google is expected to capture
the lion’s share of the expanding mobile advertising
market. The trends indicated by the charts above leads us
to believe that the CPC will keep declining at 5% YoY for
Google. The number of paid clicks is expected to go up by
12% YoY.
This shifting industry trend and its impact on Google is the
key driving factor for the 12% five Year CAGR (2016-2020)
for Google’s advertising revenue.
Project Loon and Wi-Fi Beaming Drones
Nearly 55% of the world population does not have any
access to the internet. This number is expected to change
in the coming years as pace of global development
intensifies. It is expected that the internet penetration
among the offline populace would increase at 7% YoY. (3)
Companies such as Alphabet and Facebook are aiming at
ambitious projects to accelerate the rate of internet
penetration across the globe. Facebook acquired U.K
based internet beaming drone manufacturer named
Ascenta for an undisclosed sum. Alphabet on the other
hand has been working on its hot air balloon project
named Project Loon that aims at beaming internet to the
masses through a swarm of floating helium powered hot
air balloons. Both these projects are ambitious with no
immediate mass deployment expected from either of
these projects. What these efforts point to though is the
effort taken by internet behemoths to bring more people
online, which can only help in accelerating their top and
bottom line growth.
Ad Blocking Softwares and Apps
Softwares such as Ad Block Plus have threatened the
online ad revenue by blocking the ads that are being
displayed on web pages.
The chart show above represents the number of users for
ad blocking softwares in the US and the steady increase
expected in the number preferring ad blockers going
forward. This portends a worrying trend for internet
companies relying on online advertisement revenue. This
has resulted in a constant engineering tussle between ad
blocking software companies and internet giants such as
Google, Facebook, Microsoft, and others.
What is however worrying is the recent announcement by
AdBlock Plus to create a whitelist of ads, called acceptable
ads list. This so called approved ads list would enable
AdBlock Plus to essentially act as a gatekeeper to the ads
that can be displayed on a user’s screen. While this has not
been implemented completely and rolled out, such a
whitelisting feature would intensify and strain the
relationships that these ad blocking softwares and apps
share with ad providers and advertisers. This trend needs
16.27 24.31 34.11 42.41 48.05
49%
40%
24%
13%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
0.
10.
20.
30.
40.
50.
60.
2014 2015 2016* 2017* 2018*
Global Google mobile advertising
revenues 2014-2018
Global Google mobile advertising revenues 2014-2018
YoY Growth
39.7 51.9 69.8 86.6
31%
34%
24%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
0.
20.
40.
60.
80.
100.
2014 2015 2016* 2017*
User of Ad Blocking Softwares in
US (2014 - 2017)
Number of Users in millions) YoY Growth

to be monitored closely in the future as any adverse
developments could lead to significant adjustments to the
revenue forecasts of Alphabet.
MARKETS AND COMPETITION
The companies comprising of the internet search, social
networking, enterprise software solutions and services
industry have interesting relationships that they share
between them. Each company has a sector that it exerts
complete dominance over; Alphabet in search, Microsoft
in enterprise software solutions, Facebook in social
networking, Apple in premium electronic devices. This
dominance helps in generating strong cash flows, which
are then used by these individual companies to pursue
ambitious long term projects and mount a challenge in its
competitors’ segment of dominance. The most popular
example for such challenges is the Google vs Bing battle.
Microsoft has spent billions of R&D dollars to challenge
Alphabet’s hegemony in search. Alphabet is trying to use
its productivity enterprise tools such as Google Docs,
Google Sheets, and others to challenge Microsoft on the
enterprise software solutions front. While the companies
that comprise of this industry are known for their fierce
competition, they do share a quirky relationship wherein
they form strategic alliances with each other to pursue
ambitious projects that have a potential for disruption.
Peer Comparisons
Source: Sentieo Edge Equity Terminal
Apple leads the pack in terms of total sales while Facebook
retains 85 cents on every dollar it earns for operations.
Alphabet, with its focus on various classes of products
comes in third in terms of sales and has a gross margin that
is close to the industry median. With 99% of Alphabet’s
derived from ads, a concentrated set of competitors were
analyzed. Facebook, Twitter, Baidu, Yahoo, and Yandex are
the closest peers to Alphabet in terms of the revenue
decomposition. The closest competitor to Alphabet in
terms of sales is Facebook and even Facebook’s sales is less
than 40% of Alphabet’s revenue. Baidu and Yandex are
regional players in China and Russia respectively and pose
little threat to Alphabet’s dominance outside of their
regions. Twitter is the 4th
choice platform for advertisers
after Facebook, Google, and YouTube. In a recent survey
conducted by RBC group, it was seen that advertisers are
planning to invest more in advertising on Facebook as
compared to Google.
Source: RBC (19)
While this preference for Facebook has been built into the
revenue growth assumptions, any adverse shifts in
preference will impact the future revenues of Alphabet
and will significantly impact the intrinsic value of the stock.
While it is clear that Facebook is gaining ground in terms
of grabbing advertisers attention, the team is confident
about Alphabet as it has a much more diverse product
range as compared to Facebook and is pursuing more
innovative ambitious projects than Facebook. The growth
of Facebook and its impact on the advertisement budget
of companies will be one of the keys to monitor for
Alphabet’s stock.
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
0
50000
100000
150000
200000
250000
AAPL
GOOGL
MSFT
FB
IBM
BIDU
YHOO
TWTR
YNDX
IAC
Sales($B)
Sales and Gross Margins (FY 15)
Total Revenue (in thousands $)
Median Gross Margins)
FY Gross Margin
53% 54%
61% 62%
45%
50%
55%
60%
65%
2015 2016
Advertisement expenditure trends
Plan to increase spending with Google
Plan to increase spending with Facebook

The chart above represents the potential that Alphabet’s
stock holds. It represents that the Alphabet’s stock trading
at a discount in the eyes of the 46 analysts covering
Alphabet. The forward P/E ratios of other competitors are
inflated suggesting an optimism in terms of the end
market demand drivers of the online search and
advertising industry in general. Yahoo is trading at an
inflated P/E multiple of 76X, which doesn’t seem to be
grounded in any overtly positive end market demand
driver and rather the fact that Yahoo is viewed as a holding
company of Alibaba. This is especially true after Verizon’s
acquisition of Yahoo’s core assets.
The last financial peer comparison that would be
undertaken is the measure of EBIT margins vs the adjusted
EBITDA numbers. The chart above reflects that Alphabet
not only enjoys a healthy EBITDA, but also has a strong
EBIT margin. The Henry Fund team believes that EBIT
margins are the true reflection of the operational
efficiency of a firm and in that regard Alphabet ranks
second only to Facebook in terms of EBIT margins.
Facebook has a lot less hardware projects that are being
undertaken that reflect as higher gross margin and flow
down to EBIT margins. Apple, which predominantly sells
hardware, actually posts a strong EBIT margin and so does
Microsoft. This is an indication of the strength of the
technology sector and the reason why the Henry Fund
team is bullish about the technology sector going forward.
ECONOMIC OUTLOOK
The revenue streams of Alphabet depend heavily on user
engagement through electronic devices and the
penetration of internet around the globe. There is a strong
correlation between internet penetration and global GDP
growth. It is also important to track the GDP growth
forecasts for US as it forms the biggest market for
Alphabet’s products. With over 99% of Alphabet’s revenue
coming from advertising, it is important to track the
consumer confidence index, the level of median
disposable income of the populace, and the expected
unemployment levels. Unemployment rates are negatively
correlated to median disposable income per household
and the availability of higher levels of disposable income is
a positive driver for discretionary consumer spending on
electronic products.
Going forward, the US GDP growth is expected to remain
stable at around 2% (2016-2018) and this should translate
to a steady demand for consumer discretionary electronic
products such as smartphones, tablets, PCs, and other
electronic devices. The forecasted decline in the Chinese
GDP growth is a cause for concern. Any slowdown in the
Chinese GDP will be a dampener on the output of the
electronic goods coming out of the country. It would be
partially offset by the increasing output from India. India’s
GDP is expected to grow at 7-8% during the forecast
period. Foxconn, one of the major Chinese manufacturers,
is opening up factories in India.
0
10
20
30
40
50
60
70
80
90
Forward PE Comparisons
FY 2016 P/E (Analyts Expectations) Median P/E
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
0
10000
20000
30000
40000
50000
60000
70000
80000
EBIT Margins vs EBITDA (FY 15)
Adjusted EBITDA (in thousands $) EBIT Margin (%)

Source: Global Economic Prospects 2016, World Bank (6)
Unemployment rates have a negative correlation with
discretionary electronics sales. Increasing employment
increases the median disposable income and that
correlates positively with spending on consumer
discretionary electronics such as smartphones, tablets,
PCs etc. The unemployment rate in the US has continued
to decline and the Henry Fund team believes that
unemployment will settle at 4.6% over the next 2 years.
Advertising dollars for Alphabet have a strong correlation
to not only the proliferation of electronic devices but also
the per capita disposable income that consumers can
spend on discretionary and non-discretionary consumer
goods.
Source: IBIS World (6)
The per capita disposable income chart suggests that the
disposable income available for discretionary spending will
remain steady through 2021. Per capita disposable income
is an important measure of customer’s willingness to pay
and the steady levels indicate a similar spending outlook
throughout the forecast horizon.
With majority of the revenue coming from international
sales, the strengthening dollar is negatively impacting the
earnings of US based companies. Drivers such as potential
fed fund rate hikes, Chinese GDP slowdown, and the
economic uncertainty in Europe will make the US dollar
appreciate further and this would eat further into the
earnings of US based companies such as Alphabet. A
strengthening US dollar however has the advantage of
making foreign acquisitions cheaper for Alphabet.
CATALYSTS FOR GROWTH
Alphabet is considered to be one of the most innovative
companies in the world as is evident from the moonshot
projects that it is undertaking. Due to the disruptive nature
of the moonshot projects, any success with any of the
moonshot projects will catapult Alphabet into markets
that have the potential to surpass its current online
advertising market. Innovation will one of the major
catalyst of growth for Alphabet.
While the end market demand drivers have been studied
in detail for Alphabet, there are some likely areas that
Alphabet might spring a surprise. One such segment is
cloud storage and cloud computing. Amazon and
Microsoft are the leaders in cloud based services and
services. Alphabet is taking efforts to position itself as a
viable alternative to Amazon’s Web Services and
Microsoft’s Azure. A successful cloud strategy could be
another catalyst for growth for Alphabet. The overall
market for cloud based services and products is expected
to grow at 30% CAGR through the forecast horizon.
INVESTMENT POSITIVES
• The end market demand drivers of Alphabet suggest a 5
year CAGR for revenue of 12.11% during the forecast
horizon (2016-2020). This makes Alphabet a mature but
growing stock and hence an excellent investment
 The internet penetration around the world is increasing
at 7% YoY through 2020. Alphabet, due to the quality of its
search engine, is going to benefit from the increased
internet penetration as more and more people will be
using its product. An expanding market, mainly
internationally is another positive for Alphabet
 The sheer number of moonshot initiatives undertaken
by Alphabet makes the stock attractive due to the nature
of disruptive technologies being pursued. A successful
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
2013 2014 2015E 2016F 2017F 2018F
Real GDP Growth
US China Global

launch of a moonshot product will create markets for
Alphabet that have the potential to outstrip its current
revenue numbers
INVESTMENT NEGATIVES
 The capital expenditure for moonshots has a significant
impact on the intrinsic value of the stock. Increasing
investments into moonshot projects without any returns
will impair the value of the stock
 The average revenue earned per click, measured
through the CPC numbers is declining YoY due to the
increased usage of mobile devices. While this decline has
been built into the model, any adverse deterioration will
hamper the intrinsic value of the stock
 Alphabet has repeatedly failed in launching a successful
social networking product. Despite having the first mover
advantage, the social networking site of Alphabet (Orkut)
fell behind Facebook. Facebook has been gaining market
in the online advertising industry through the power of its
social networking platform. Any greater than anticipated
grab of the advertising market share by Facebook will
compromise the revenue forecast assumptions and hence
weigh down the intrinsic value of the stock
VALUATION
DCF-EP, DDM, and relative P/E analysis have been used to
value Alphabet Inc.
We believe that the intrinsic value of Alphabet’s stock is
closest to the DCF-EP model as the DCF model accounts for
the residual income available to all equity holders.
Alphabet has no history of paying any dividends. The
management of Alphabet has indicated that it has no plans
to initiate a dividend policy in the foreseeable future.
Hence the stock price indicated by the DDM model is
disregarded. Despite the historical track record of not
paying dividends and the forecasted horizon maintaining
that trend, the DDM model was still constructed to gain an
insight into the theoretical P/E value of Alphabet leading
into its steady state. The continuing value P/E multiple
leading to the steady state turns out to be 14.36 in the
DDM model.
The continuing value P/E is lesser than the current
expected forward P/E of 26.3. For a firm whose revenue is
modelled to grow at 12.11% CAGR from 2015 to 2020 and
with a long term growth rate of 3.5%, the P/E multiple of
14.2 represents a stock price that is undervalued to its
future earnings potential. No importance has been
attached to the stock price derived from the DDM model.
Due to the gamut of products at Alphabet, the competitive
landscape of Alphabet is quite vast and varied. It competes
with Apple both on the hardware space (Nexus vs IPhones)
as well as the software space (Android vs iOS). It competes
with Facebook in bringing social media applications to the
masses. Microsoft competes with Alphabet for search
traffic (Bing vs Google) while also competing on hardware
product lines. Despite such a varied product portfolio of
Alphabet, 99% of its revenue is derived from
advertisements. This partly skews the relative valuation
788.48
1025
495
916 941
0
200
400
600
800
1000
1200
Current
Stock Price
DCF-EP DDM Relative
P/E
Median
Analysts'
Estimates
Price ($)
Price ($)
20.7
26.3
23.3
19.6
16.8
14.36
-30
-20
-10
0
10
20
30
0
5
10
15
20
25
30
2015 2016E 2017E 2018E 2019E 2020E
P/E Trends-DDM
P/E (X) P/E-yoy (%)

metric as Alphabet hopes to maximize user engagement
with its products and leverage the user information to
drive its advertisement revenue line. Social media
companies such as Facebook and Twitter, pure search
players such as Yandex, Baidu, and Yahoo, and media
companies have a similar business model. A
comprehensive list of 8 companies were used to arrive at
the stock price using Relative valuation model and the
stock price was estimated to be $916.
The price estimated using the Relative Valuation model
suggests that GOOGL is currently trading at a discount as
compared to its current stock price. The relative valuation
model is considered subservient to the DCF model as the
price suggested by the relative valuation model is not a
complete reflection of the inherent drivers of Alphabet
and rather extrapolative approach based on what the
market thinks about Alphabet’s peers.
Short-Term Revenue Growth Assumptions
The 5-year revenue growth assumptions for individual
segments of Alphabet have been determined by studying
the end market demand for each of these segments.
Revenue from advertising and revenue from its other bets
constitute the major revenue segments of Alphabet.
Advertising and other revenues have been further broken
down into segments that track the demand drivers of
Google Websites, Network Members, and revenue from
licensing. The demand drivers for each of these segments
have been discussed in detail in the earlier sections of this
report.
0
10
20
30
40
50
60
70
80
90
100
P/E Trends - Relative Valuation
P/E 16 P/E 17 Median
Google
Websites
Growth
Network
Members's
Websites
Growth
Other
Revenues
Growth
Other Bets
Growth Rate
2016E 16% 8% 6% 20%
2017E 16% 8% 6% 20%
2018E 16% 7% 6% 20%
2019E 13% 7% 6% 15%
2020E 10% 4% 4% 10%
0%
5%
10%
15%
20%
25%
Short Term Revenue Growth Rate
2016E 2017E 2018E 2019E 2020E
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
20000
40000
60000
80000
100000
120000
140000
2015 2016E 2017E 2018E 2019E 2020E
Revenueinbillionsofdollars
Forecasted Revenue
Revenue YoY Change

The short term revenue growth assumptions and its
impact on the total revenue has been shown above. The 5
year CAGR for revenue by factoring in all the demand
drivers is estimated to be 12.11%.
Costs and Margins
Source: HF Estimates and assumptions
Alphabet does not clearly breakdown the costs incurred
for all its revenue segments. The revenue vs cost
breakdown shown in the chart above are through
extrapolation of available data from 10K and educated
assumptions based on the information available in the
10K. The key take-away from the chart shown above is that
acquisition costs of Network Members (that includes TAC
for distribution partners) is a very significant percentage of
the revenue earned from the Network Members. Any
growth explored by Alphabet through its Network and
distribution partners will impact the net margins of
Alphabet. While Alphabet does not comment on the
individual profitability of its Other Bets segment, the data
extrapolation reveals that Other Bets is a loss making
segment of Alphabet, which is line with various analyst
commentaries. To study the impact of cost of revenues on
the DCF stock price, sensitivity analyses were performed.
The chart above shows that the costs associated with non-
network members is very significant factor to the intrinsic
value of the stock. Sustained losses from the Other Bets’
segment will negatively impact the value of the stock.
Source: 10K (5) and HF Estimates
69.78%
20.08% 9.54% 0.60%16.37%
95.41%
38.65%
555.31%
0.00%
100.00%
200.00%
300.00%
400.00%
500.00%
600.00%
Google
Websites
Network
Members
(including
distribution
partners for
costs)
Play Store
,Licensing ,
H/W
Other Bets
(FY15)
y = -34.745x + 1070.6
R² = 0.9982
0
200
400
600
800
1000
1200
18% 19% 20% 21% 22% 23% 24% 25% 26% 27%
Cost of Revenues for Google Websites , Play
Store, H/W, and Other Bets
DCF Stock Price ($)
DCF Stock Price
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
2014 2015 2016E 2017E 2018E 2019E 2020E
Alphabet's Margins
Gross Margin EBIT Margin Net Margin

The margins are seen to be consistent with historical
trends through the forecast horizon. This indicates that the
revenue drivers of Alphabet do not impose any additional
undue burden on the margin lines of Alphabet.
Another major expense that corporations incur is the
capital expenditure. With the various moonshot projects
at Alphabet, PP&E is one very factor that needs to be
monitored (especially when moonshots aren’t expected to
contribute to revenue in the foreseeable future). The
chart above represents the sensitivity of the stock price to
the capex outlay. The DCFmodel has been built with a 19%
expected growth in capex outlay, but as can be seen from
the chart above, a 29% growth will pull down the intrinsic
value of the stock.
Perpetuity Growth Assumption
Source: Statista, IMF (1)
The forecast for Global GDP suggests a 3.9% GDP growth
in 2020 and this has driven the long term growth
assumption of 3.5% as the end market segments that
Alphabet targets are essentially dependent on the health
of the economy. Since the DCF model price is most
sensitive to the perpetuity growth assumption, a
sensitivity analysis was done by varying the CV growth of
NOPLAT. If Alphabet were to maintain a status quo after
2020, i.e. a 0% growth in perpetuity, then its DCF stock
price should be $714. Even in the no growth scenario,
Alphabets’ intrinsic value according to the DCF model
returns a positive value suggesting that it can weather
rough and uncertain times in the future as long as it makes
relevant products that shields it from contraction.
Valuation Summary
The stock price according to the DCF model is $1025 and
this represents a 9% premium over the 1-year consensus
estimate of $941. The various sensitivity analyses
performed have been described in the sections above and
the analysis reveals a target price for Alphabet between
$970-1100. The DCF model price suggests a 30% upside
over the current market price of Alphabet and this upside
potential is the driver for the buy recommendation.
KEYS TO MONITOR
One of the most important keys to monitor is the
competitive landscape of Alphabet. The model has already
built in top line revenue growth slowing down due to the
increased competition from Facebook. But any greater
than anticipated decline in revenues will be a red flag.
Alphabet is fighting multiple anti-trust law suits filed
against it in the European courts. Adverse decisions from
any of those lawsuits will impact the future earnings
potential of Alphabet.
The moonshot projects of Alphabet are other keys to
monitor. A successful moonshot project will catapult
Alphabet’s earnings, a development that will only reaffirm
the buy recommendation. A more worrying development
would be increased capex outlays for moonshots without
any tangible returns. The sensitivity analysis of the DCF
stock price revealed that for every 1% increase in PP&E,
the stock price fell by over $11 (this is assuming that
moonshots continue to not generate any revenue).
y = -11.873x + 1038.8
R² = 0.9988
800
850
900
950
1000
1050
19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29%
PP&E Growth
DCF Share Price ($)
DCF Share Price
3.20%
3.40%
3.60%
3.80%
4.00%
2016 2017 2018 2019
Forecasted Global GDP (%)
Forecasted Global GDP (%)

REFERENCES
1. Global GDP forecasts:
http://www.statista.com/statistics/273951/growth-of-
the-global-gross-domestic-product-gdp/
2. Global Technology Companies, Fortune 500:
http://beta.fortune.com/global500/list/filtered?sector=T
echnology
3. Number of Internet Users:
http://www.internetlivestats.com/internet-users/
4. Search Engine Market share:
https://www.netmarketshare.com/search-engine-
market-
share.aspx?qprid=4&qpsp=2016&qpnp=1&qptimeframe=
Y&qpcustomd=1
5. Alphabet Inc. 2015 10K filing
6. Per Capita disposable income:
https://www.ibisworld.com/gosample.aspx?cid=1&rtid=4
7. EBiz and Alexa:
http://www.ebizmba.com/articles/video-websites
8. YoY growth in YouTube users in US:
http://www.statista.com/statistics/469172/youtube-
viewer-number-growth-united-states/
9. Video Ads Revenue Growth:
https://www-statista-
com.proxy.lib.uiowa.edu/outlook/218/100/video-
advertising/worldwide#takeaway
10. Twitter Video Ad Revenue Sharing:
http://www.reuters.com/article/us-twitter-video-
idUSKCN11522S
11. Smart Home Devices and Smart Home Controllers:
http://www.statista.com.proxy.lib.uiowa.edu/statistics/4
95625/smart-home-devices-and-controllers-sales-in-the-
us/
12. Google Fiber Network
13. Bloomberg
14. Exodus at Verily:
https://www.statnews.com/2016/03/28/google-life-
sciences-exodus/#staff
15. Android vs iOS:
72307/market-share-forecast-for-smartphone-operating-
systems/
16. Mobile Ad Spending:
http://www.wordstream.com/blog/ws/2016/09/15/mobi
le-advertising-statistics
17. Global Google Mobile Ad Revenue:
39477/google-mobile-ad-revenues-worldwide/
18. Ad Block Users:
95839/number-ad-blocking-users-usa/
19. Increased preference for Facebook over Google:
http://www.fool.com/investing/general/2016/03/18/twit
ter-remains-digital-advertisers-fourth-choice.aspx
IMPORTANT DISCLAIMER
Henry Fund reports are created by student enrolled in the
Applied Securities Management (Henry Fund) program at
the University of Iowa’s Tippie School of Management.
These reports are intended to provide potential employers
and other interested parties an example of the analytical
skills, investment knowledge, and communication abilities
of Henry Fund students. Henry Fund analysts are not
registered investment advisors, brokers or officially
licensed financial professionals. The investment opinion
contained in this report does not represent an offer or
solicitation to buy or sell any of the aforementioned

securities. Unless otherwise noted, facts and figures
included in this report are from publicly available sources.
This report is not a complete compilation of data, and its
accuracy is not guaranteed. From time to time, the
University of Iowa, its faculty, staff, students, or the Henry
Fund may hold a financial interest in the companies
mentioned in this report.

Ticker Symbol (Class A) GOOGL
Current Share Price $788.48
Ticker Symbom (Class C) GOOG
Current Model Date 9/10/2016
Fiscal Year End Dec. 31
Pre‐Tax Cost of Debt 3.37%
Beta 1.277
Risk‐Free Rate 2.23% (30 Yr Treasury)
Equity Risk Premium 5%
CV Growth of NOPLAT 3.50%
CV Growth of EPS
Current Dividend Yield 0.00%
Operating cash assumption 2.00%
Marginal Tax Rate 21.00%
WACC (2016‐2017) 8.49%
WACC (2017‐2018) 8.47%
WACC(2020) 8.45%
Total Shares outstanding( Class C) 343.60
Total Shares outstanding (Class A) 294.80
Total Shares outstanding (Class B) 51.75
Dividend growth Rate 0%
DCF Share price $1,025
Upside potential 29.98%
5 Yr CAGR Revenue Growth 12.11%
Alphabet Inc
Key Assumptions of Valuation Model

Beta
1025 0.9 0.95 0.97 1 1.05 1.1 1.15 1.2 1.277 1.3 1.4 1.5 1.8
4.00% 2185 2016 1968 1871 1747 1638 1543 1458 1346 1316 1200 1103 893
4.25% 1996 1846 1804 1718 1607 1510 1424 1349 1247 1220 1114 1027 835
4.50% 1838 1704 1666 1589 1489 1401 1324 1255 1162 1137 1041 961 784
4.75% 1704 1583 1549 1479 1388 1308 1237 1174 1089 1066 978 904 740
Equity Risk 5.00% 1589 1479 1447 1383 1300 1226 1161 1103 1025 1004 922 853 701
Premium 5.25% 1489 1388 1359 1300 1223 1155 1095 1041 968 949 873 809 667
5.50% 1401 1308 1281 1226 1155 1092 1036 986 918 900 829 769 636
5.75% 1324 1237 1212 1161 1095 1036 984 937 874 856 790 733 608
6.00% 1255 1174 1151 1103 1041 986 937 893 833 817 754 701 583
6.25% 1193 1117 1096 1051 993 941 895 853 797 782 722 672 560
6.50% 1137 1066 1046 1004 949 900 856 817 764 750 693 646 540
6.75% 1087 1020 1001 961 909 863 821 784 734 720 667 622 521
Beta
1025 0.9 0.95 0.97 1 1.05 1.1 1.15 1.2 1.277 1.3 1.4 1.5 1.8
0.00% 899 869 860 841 815 790 768 746 715 707 672 641 564
0.50% 949 915 905 883 854 826 801 777 743 733 695 661 578
1.00% 1008 969 957 932 899 868 839 812 774 764 721 684 593
1.50% 1079 1033 1019 990 952 916 883 853 810 798 751 709 610
CV NOPLAT 2.00% 1165 1110 1094 1060 1014 973 935 900 851 838 784 738 629
Growth 2.50% 1272 1205 1185 1144 1090 1041 996 955 899 884 823 771 650
3.00% 1409 1324 1299 1249 1183 1123 1070 1022 956 938 868 809 674
3.50% 1589 1479 1447 1383 1300 1226 1161 1103 1025 1004 922 853 701
4.00% 1838 1688 1646 1561 1452 1358 1276 1204 1109 1083 986 906 732
4.50% 2206 1985 1926 1806 1658 1533 1426 1334 1214 1183 1064 968 768
5.00% 2800 2443 2350 2169 1951 1775 1628 1505 1350 1310 1161 1045 810
CV NOPLAT Growth
1025 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
6.50% 870 919 978 1048 1133 1240 1378 1561 1817 2202 2843
6.75% 845 891 944 1007 1084 1179 1299 1456 1670 1979 2466
7.00% 822 864 913 971 1040 1124 1230 1366 1548 1801 2182
7.25% 801 839 884 937 1000 1076 1170 1288 1444 1656 1962
7.42% 787 823 866 916 974 1045 1132 1241 1381 1570 1836
7.75% 762 795 834 878 930 992 1067 1160 1278 1432 1641
WACC‐CV 7.81% 758 790 828 871 923 983 1057 1147 1261 1409 1611
8.00% 744 775 811 852 900 956 1024 1107 1210 1344 1521
8.25% 728 757 790 828 872 923 985 1059 1151 1267 1419
8.45% 715 743 774 810 851 899 956 1024 1108 1213 1349
8.75% 698 723 752 784 822 865 916 977 1051 1142 1257
9.00% 684 708 734 765 800 840 886 942 1008 1089 1191
9.25% 671 693 718 747 779 816 859 909 970 1042 1132
9.50% 658 679 703 729 759 794 834 880 934 1000 1080
9.75% 646 666 688 713 741 773 810 853 903 962 1034
10.00% 635 654 675 698 724 754 788 827 873 927 992
$1,025
18% 1025
19% 1006
20% 970
21% 935
Cost of Revenues 22% 899
for Google Websites , 23% 863
Play Store, 24% 828
H/W, and Other Bets 25% 792
26% 756
27% 721
$1,025
19% 1025
20% 1014
21% 1003
22% 992
PP&E 23% 981
24% 969
25% 957
26% 945
27% 932
28% 919
29% 906

Alphabet Inc
Revenue Decomposition
All figures in millions
Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E
Google (advertising & other) 55519.00 66001.00 74541.00 84549.82 96020.93 109002.69 121451.14 131850.06
Other Bets revenues ‐ ‐ 448.00 537.60 645.12 774.14 890.27 979.29
Motorola Mobile (hardware & other) 4306.00 ‐ ‐ 0.00 0.00 0.00 0.00 0.00
Revenues 59825.00 66001.00 74989.00 85087.42 96666.054 109776.84 122341.41 132829.36
% Advertising 93% 100% 99% 99.37% 99.33% 99.29% 99.27% 99.26%
% Other Bets 0% 0% 1% 0.63% 0.67% 0.71% 0.73% 0.74%
% Motorola 7% 0% 0% 0.00% 0.00% 0.00% 0.00% 0.00%
% Total Revenue 100% 100% 100% 100.00% 100.00% 100.00% 100.00% 100.00%
Advertising Growth Rate 20.59% 18.88% 12.94% 13.43% 13.57% 13.52% 11.42% 8.56%
Other Bets Growth Rate NA NA NA 20.00% 20.00% 20.00% 15.00% 10.00%
Motorola Growth Rate 4.11% ‐100.00% NA 0.00% 0.00% 0.00% 0.00% 0.00%
Total Revenue Growth Rate 19.23% 10.32% 13.62% 13.47% 13.61% 13.56% 11.45% 8.57%
Google Segment Revenue Breakdown
Google Websites 37422.00 45085.00 52357.00 60734.12 70451.58 81723.83 92347.93 101582.72
Network Members's Websites 13125.00 13971.00 15033.00 16235.64 17534.49 18761.91 20075.24 20878.25
Other Revenues 4972.00 6945.00 7151.00 7580.06 8034.86 8516.96 9027.97 9389.09
Total Revenue from Google Segment 55519.00 66001.00 74541.00 84549.82 96020.934 109002.69 121451.14 131850.06
% Google Websites 67.40% 68.31% 70.24% 71.83% 73.37% 74.97% 76.04% 77.04%
% Network Members's Websites 23.64% 21.17% 20.17% 19.20% 18.26% 17.21% 16.53% 15.83%
% Other Revenues 8.96% 10.52% 9.59% 8.97% 8.37% 7.81% 7.43% 7.12%
Google Websites Growth 19.86% 20.48% 16.13% 16.00% 16.00% 16.00% 13.00% 10.00%
Network Members's Websites Growth 5.29% 6.45% 7.60% 8.00% 8.00% 7.00% 7.00% 4.00%
Other Revenues Growth 111.30% 39.68% 2.97% 6.00% 6.00% 6.00% 6.00% 4.00%
Rest of the World % 44.00% 45.00% 44.00% 46.00% 46.00% 47.00% 48.00% 50.00%
UK Revenue % 10.00% 10.00% 10.00% 9.00% 9.00% 8.00% 8.00% 8.00%
Domestic Revenue % 46.00% 45.00% 46.00% 45.00% 45.00% 45.00% 44.00% 42.00%

Alphabet Inc
Income Statement
Google (advertising & other) 55519.00 66001.00 74541.00 84549.82 96020.93 109002.69 121451.14 131850.06
Other Bets revenues - - 448.00 537.60 645.12 774.14 890.27 979.29
Motorola Mobile (hardware & other) 4306.00 - - 0.00 0.00 0.00 0.00 0.00
Revenues 59825.00 66001.00 74989.00 85087.42 96666.05 109776.84 122341.41 132829.36
Costs of revenues - Motorola Mobile (hardware & other) 3865.00 - - 0 0 0 0 0
Cost of revenues - Google (advertising & other) 21993.00 25691.00 28164.00 31405.11 34799.11 38407.16 41997.30 44710.76
Cost of revenues 25858.00 25691.00 28164.00 31405.11 34799.11 38407.16 41997.30 44710.76
Gross Profit 33967.00 40310.00 46825.00 53682.31 61866.95 71369.68 80344.11 88118.59
Research & development expenses 7952.00 9832.00 12282.00 13935.96 15832.36 17979.69 20037.57 21755.33
Sales & marketing expenses 7253.00 8131.00 9047.00 10354.47 11763.50 13358.98 14887.99 16164.29
General & administrative expenses 4796.00 5851.00 6136.00 7389.16 8289.93 9348.05 10470.18 11644.93
Charge related to thr resolution of Department of Justice investigation 0.00 - - 0 0 0 0 0
Operating Costs and Expenses 20001.00 23814.00 27465.00 31679.59 35885.78 40686.72 45395.73 49564.54
Interest income (expense) & other, net 530.00 763.00 291.00 780.52 793.08 798.28 803.51 808.78
Income from continuing operations before income taxes 14496.00 17259.00 19651.00 22783.24 26774.24 31481.24 35751.89 39362.83
Provision for income taxes 2282.00 3331.00 3303.00 4784.48 5622.59 6611.06 7507.90 8266.19
Net income from continuing operations 12214.00 13928.00 16348.00 17998.76 21151.65 24870.18 28243.99 31096.63
Net income (loss) from discontinued operations 706.00 516.00 0.00 0 0 0 0 0
Net income 12920.00 14444.00 16348.00 17998.76 21151.65 24870.18 28243.99 31096.63
Year end shares outstanding 671.67 680.17 687.35 689.24 688.51 687.94 686.99 685.37
Net income (loss) per share - basic 19.24 21.37 23.78 26.15 30.70 36.14 41.08 45.32
Dividends per share 0 0 0 0 0 0 0 0

Alphabet Inc
Balance Sheet
Cash & cash equivalents 18898.00 18347.00 16549.00 27746.60 40175.49 54569.02 69843.17 82945.90
Marketable securities 39819.00 46048.00 56517.00 56861.75 57208.61 57557.58 57908.68 58261.93
Total cash, cash equivalents, & marketable securities 58717.00 64395.00 73066.00 84608.36 97384.10 112126.61 127751.86 141207.82
Accounts receivable, gross 9463.00 9608.00 11852.00 13097.83 14880.17 16898.37 18832.48 20446.93
Allowance 581.00 225.00 296.00 479.34 544.56 618.42 689.20 748.29
Accounts receivable, net 8882.00 9383.00 11556.00 12618.49 14335.61 16279.94 18143.27 19698.64
Inventories 426.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Receivable under reverse repurchase agreements 100.00 875.00 450.00 558.68 562.08 565.51 568.96 572.43
Deferred income taxes, net 1526.00 1322.00 0.00 0.00 0.00 0.00 0.00 0.00
Income taxes receivable, net 408.00 1298.00 1903.00 1825.45 2145.22 2522.35 2864.53 3153.85
Prepaid revenue share, expenses & other assets 2827.00 3412.00 3139.00 3993.72 4537.19 5152.56 5742.30 6234.57
Total current assets 72886.00 80685.00 90114.00 103604.70 118964.19 136646.98 155070.93 170867.32
Prepaid revenue share, expenses & other assets, non-current 1976.00 3280.00 3181.00 3549.43 4032.44 4579.36 5103.49 5541.00
Non-marketable investments 1976.00 3079.00 5183.00 6737.90 8759.27 11387.05 14803.17 19244.12
Deferred income taxes 0.00 0.00 251.00 363.58 427.27 502.38 570.54 628.16
Property & equipment, gross 23837.00 32746.00 40146.00 47764.57 56828.92 67613.43 80444.53 95710.61
Less: accumulated depreciation & amortization 7313.00 8863.00 11130.00 13884.23 17100.19 20871.28 25308.10 30541.71
Property & equipment, net 16524.00 23883.00 29016.00 33880.34 39728.73 46742.15 55136.43 65168.90
Intangible assets, Gross 8730.00 8991.90 9261.66 9539.51 9825.69 10120.46
Accumulated Amortization 4883.00 5689.00 6413.00 7050.00 7578.00 8012.00
Intangible assets, net 6066.00 4607.00 3847.00 3302.90 2848.66 2489.51 2247.69 2108.46
Goodwill 11492.00 15599.00 15869.00 15869.00 15869.00 15869.00 15869.00 15869.00
Total assets 110920.00 131133.00 147461.00 167307.85 190629.56 218216.43 248801.24 279426.96
Accounts payable 2453.00 1715.00 1931.00 2200.99 2500.50 2839.65 3164.66 3435.96
Short-term debt 3009.00 2009.00 3225.00 2219.00 2219.00 2219.00 2219.00 219.00
Accrued compensation & benefits 2502.00 3069.00 3539.00 3843.54 4366.56 4958.80 5526.36 6000.12
Accrued expenses & other current liabilities 3755.00 4434.00 4768.00 5488.99 6235.92 7081.70 7892.24 8568.82
Accrued revenue share 1729.00 1952.00 2329.00 2539.41 2884.97 3276.26 3651.25 3964.25
Securities lending payable 1374.00 2778.00 2428.00 1962.08 1974.05 1986.09 1998.21 2010.39
Deferred revenue 1062.00 752.00 788.00 894.12 1015.79 1153.56 1285.59 1395.80
Income taxes payable, net 24.00 96.00 302.00 208.55 245.09 288.17 327.27 360.32
Total current liabilities 15908.00 16805.00 19310.00 19356.68 21441.88 23803.22 26064.56 25954.66
Long-term debt 2236.00 3228.00 1995.00 1776.00 1776.00 1776.00 1776.00 1776.00
Deferred revenue, non-current 139.00 104.00 151.00 167.70 190.52 216.36 241.13 261.80
Income taxes payable, net, non-current 2638.00 3407.00 3663.00 5243.49 6162.01 7245.31 8228.18 9059.23
Deferred income taxes 1947.00 1971.00 189.00 2395.64 2815.29 3310.23 3759.29 4138.98
Other long-term liabilities 743.00 1118.00 1822.00 1521.81 1728.89 1963.38 2188.10 2375.68
Total Liabilities 23611.00 26633.00 27130.00 30461.32 34114.60 38314.51 42257.26 43566.34
Class A & class B common stock, & class C capital stock & additional paid-in capital 25922.00 28767.00 32982.00 31498.78 30015.56 28532.34 26930.41 25150.41
Accumulated other comprehensive income (loss) 125.00 27.00 -1874.00 ‐1874.00 ‐1874.00 ‐1874.00 ‐1874.00 ‐1874.00
Retained earnings 61262.00 75706.00 89223.00 107221.76 128373.41 153243.58 181487.57 212584.21
Total stockholders' equity 87309.00 104500.00 120331.00 136846.54 156514.96 179901.92 206543.98 235860.62
Total Liabilities and Equity 110920.00 131133.00 147461.00 167307.85 190629.56 218216.43 248801.24 279426.96

Alphabet Inc
Forecasted Cash Flow Statement
Fiscal Years Ending Oct. 31 2016E 2017E 2018E 2019E 2020E
Cash flow from operations:
Net Income (loss) 17998.76 21151.65 24870.18 28243.99 31096.63
Add Depreciation 2754.23 3215.96 3771.09 4436.81 5233.61
Add Amortization 806.00 724.00 637.00 528.00 434.00
Changes :
Accounts receivable, net -1062.49 -1717.12 -1944.33 -1863.33 -1555.37
Inventories 0.00 0.00 0.00 0.00 0.00
Deferred income taxes, net 0.00 0.00 0.00 0.00 0.00
Income taxes receivable, net 77.55 -319.77 -377.14 -342.18 -289.32
Prepaid revenue share, expenses & other assets -854.72 -543.46 -615.38 -589.74 -492.27
Prepaid revenue share, expenses & other assets, non-current -368.43 -483.00 -546.92 -524.13 -437.51
Deferred income taxes -112.58 -63.69 -75.12 -68.15 -57.62
Accounts payable 269.99 299.51 339.14 325.01 271.30
Accrued compensation & benefits 304.54 523.03 592.24 567.56 473.76
Accrued expenses & other current liabilities 720.99 746.94 845.78 810.54 676.58
Accrued revenue share 210.41 345.56 391.29 374.99 313.01
Deferred revenue 106.12 121.67 137.77 132.03 110.21
Income taxes payable, net -93.45 36.53 43.09 39.09 33.05
Deferred revenue, non-current 16.70 22.82 25.84 24.76 20.67
Income taxes payable, net, non-current 1580.49 918.52 1083.30 982.88 831.05
Deferred income taxes 2206.64 419.65 494.94 449.06 379.69
Other long-term liabilities -300.19 207.09 234.49 224.72 187.58
Net Cash flow from operating activities 24260.54 25605.88 29907.26 33751.92 37229.05
Cash flow from investing:
Changes:
Marketable Securities -344.75 -346.86 -348.97 -351.10 -353.24
Receivable under reverse repurchase agreements -108.68 -3.41 -3.43 -3.45 -3.47
Property & equipment, gross -7618.57 -9064.35 -10784.51 -12831.10 -15266.08
Goodwill 0.00 0.00 0.00 0.00 0.00
Intangible assets, Gross -261.90 -269.76 -277.85 -286.19 -294.77
Non-marketable investments -1554.90 -2021.37 -2627.78 -3416.12 -4440.95
Securities lending payable -465.92 11.97 12.04 12.12 12.19
Net Cash flow from investing -10354.72 -11693.78 -14030.50 -16875.84 -20346.32
Cash flow from financing:
Changes:
ST Debt -1006.00 0.00 0.00 0.00 -2000.00
LT Debt -219.00 0.00 0.00 0.00 0.00
Class A & class B common stock, & class C capital stock & additional paid-in capital -1483.22 -1483.22 -1483.22 -1601.93 -1780.00
Accumulated other comprehensive income (loss) 0.00 0.00 0.00 0.00 0.00
Net cash flow from financing -2708.22 -1483.22 -1483.22 -1601.93 -3780.00
Change in cash 11197.60 12428.88 14393.54 15274.15 13102.72
Beginning Cash 16549.00 27746.60 40175.49 54569.02 69843.17
Ending Cash 27746.60 40175.49 54569.02 69843.17 82945.90

Alphabet Inc
Cash Flow Statement
Fiscal Years Ending Dec. 31 2013 2014 2015
Net income 12920 14444 16348
Depreciation & amortization of property & equipment 2781 3523 -
Depreciation & impairment of property & equipment - - 4132
In-process research & development - - -
Amortization of intangibles & other assets 1158 1456 -
Amortization & impairment of intangible assets - - 931
Stock-based compensation expense 3343 4279 5203
Excess tax benefits from stock-based award activities -481 -648 -548
Deferred income taxes -437 -104 -179
Loss (gain) on divestiture of business -700 -740 0
Impairment of equity investments 0 - -
Loss (gain) on equity interest - -126 -
Loss (gain) on sale of non-marketable equity investments - -159 -
Loss (gain) on marketable & non-marketable investments, net - - 334
Other adjustments 106 87 212
Accounts receivable -1307 -1641 -2094
Income taxes, net 401 283 -179
Inventories -234 - -
Prepaid revenue share, expenses & other assets -696 459 -318
Accounts payable 605 436 203
Accrued expenses & other liabilities 713 757 1597
Accrued revenue share 254 245 339
Deferred revenue 233 -175 43
Net cash flows from operating activities 18659 22376 26024
Purchases of property & equipment -7358 -10959 -9915
Purchases of marketable securities -45444 -56310 -74368
Maturities & sales of marketable securities 38314 51315 62905
Purchases of non-marketable investments -569 -1227 -2172
Cash collateral related to (from) securities lending -299 1403 -350
Investments in reverse repurchase agreements 600 -775 425
Proceeds from divestiture of business 2525 386 0
Acquisitions, net of cash acquired & proceeds received from divestiture, & purchases of intangible & other assets -1448 -4888 -
Acquisitions, net of cash acquired, & purchases of intangibles & other assets - - -236
Net cash flows from investing activities -13679 -21055 -23711
Net proceeds (payments) related to stock-based award activities -781 -2069 -2375
Excess tax benefits from stock-based award activities 481 648 548
Adjustment payment to class C capital stockholders - - -47
Repurchases of capital stock - - -1780
Repurchase of common stock in connection with acquisitions - - -
Proceeds from issuance of debt, net of costs 10768 11625 13705
Repayments of debt -11325 -11643 -13728
Proceeds from issuance of short-term debt - - -
Repayment of short-term debt - - -
Net proceeds from public offerings - - -
Net cash flows from financing activities -857 -1439 -3677
Effect of exchange rate changes on cash & cash equivalents -3 -433 -434
Net increase (decrease) in cash & cash equivalents 4120 -551 -1798
Cash & cash equivalents at beginning of period 14778 18898 18347
Cash & cash equivalents at end of period 18898 18347 16549
Cash paid for taxes 1932 2819 3338
Cash paid for interest 72 86 96

Alphabet Inc
Common Size Income Statement
Google (advertising & other) 92.80% 100.00% 99.40% 99.37% 99.33% 99.29% 99.27% 99.26%
Other Bets revenues 0.00% 0.00% 0.60% 0.63% 0.67% 0.71% 0.73% 0.74%
Motorola Mobile (hardware & other) 7.20% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Costs of revenues - Motorola Mobile (hardware & other) 6.46% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Cost of revenues - Google (advertising & other) 36.76% 38.93% 37.56% 36.91% 36.00% 34.99% 34.33% 33.66%
Cost of revenues 43.22% 38.93% 37.56% 36.91% 36.00% 34.99% 34.33% 33.66%
Gross Profit 56.78% 61.07% 62.44% 63.09% 64.00% 65.01% 65.67% 66.34%
Research & development expenses 13.29% 14.90% 16.38% 16.38% 16.38% 16.38% 16.38% 16.38%
Sales & marketing expenses 12.12% 12.32% 12.06% 12.17% 12.17% 12.17% 12.17% 12.17%
General & administrative expenses 8.02% 8.87% 8.18% 8.68% 8.58% 8.52% 8.56% 8.77%
Charge related to thr resolution of Department of Justice investigation 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Operating Costs and Expenses 33.43% 36.08% 36.63% 37.23% 37.12% 37.06% 37.11% 37.31%
Interest income (expense) & other, net 0.89% 1.16% 0.39% 0.92% 0.82% 0.73% 0.66% 0.61%
Income from continuing operations before income taxes 24.23% 26.15% 26.21% 26.78% 27.70% 28.68% 29.22% 29.63%
Provision for income taxes 3.81% 5.05% 4.40% 5.62% 5.82% 6.02% 6.14% 6.22%
Net income from continuing operations 20.42% 21.10% 21.80% 21.15% 21.88% 22.66% 23.09% 23.41%
Net income (loss) from discontinued operations 1.18% 0.78% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Net income 21.60% 21.88% 21.80% 21.15% 21.88% 22.66% 23.09% 23.41%

Alphabet Inc
Common Size Balance Sheet
Cash & cash equivalents 31.59% 27.80% 22.07% 32.61% 41.56% 49.71% 57.09% 62.45%
Marketable securities 66.56% 69.77% 75.37% 66.83% 59.18% 52.43% 47.33% 43.86%
Total cash, cash equivalents, & marketable securities 98.15% 97.57% 97.44% 99.44% 100.74% 102.14% 104.42% 106.31%
Accounts receivable, gross 15.82% 14.56% 15.80% 15.39% 15.39% 15.39% 15.39% 15.39%
Allowance 0.97% 0.34% 0.39% 0.56% 0.56% 0.56% 0.56% 0.56%
Accounts receivable, net 14.85% 14.22% 15.41% 14.83% 14.83% 14.83% 14.83% 14.83%
Inventories 0.71% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Receivable under reverse repurchase agreements 0.17% 1.33% 0.60% 0.66% 0.58% 0.52% 0.47% 0.43%
Deferred income taxes, net 2.55% 2.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Income taxes receivable, net 0.68% 1.97% 2.54% 2.15% 2.22% 2.30% 2.34% 2.37%
Prepaid revenue share, expenses & other assets 4.73% 5.17% 4.19% 4.69% 4.69% 4.69% 4.69% 4.69%
Total current assets 121.83% 122.25% 120.17% 121.76% 123.07% 124.48% 126.75% 128.64%
Prepaid revenue share, expenses & other assets, non-current 3.30% 4.97% 4.24% 4.17% 4.17% 4.17% 4.17% 4.17%
Non-marketable investments 3.30% 4.67% 6.91% 7.92% 9.06% 10.37% 12.10% 14.49%
Deferred income taxes 0.00% 0.00% 0.33% 0.43% 0.44% 0.46% 0.47% 0.47%
Property & equipment, gross 39.84% 49.61% 53.54% 56.14% 58.79% 61.59% 65.75% 72.06%
Less: accumulated depreciation & amortization 12.22% 13.43% 14.84% 16.32% 17.69% 19.01% 20.69% 22.99%
Property & equipment, net 27.62% 36.19% 38.69% 39.82% 41.10% 42.58% 45.07% 49.06%
Intangible assets, net 10.14% 6.98% 5.13% 3.88% 2.95% 2.27% 1.84% 1.59%
Goodwill 19.21% 23.63% 21.16% 18.65% 16.42% 14.46% 12.97% 11.95%
Total assets 185.41% 198.68% 196.64% 196.63% 197.20% 198.78% 203.37% 210.37%
Accounts payable 4.10% 2.60% 2.58% 2.59% 2.59% 2.59% 2.59% 2.59%
Short-term debt 5.03% 3.04% 4.30% 2.61% 2.30% 2.02% 1.81% 0.16%
Accrued compensation & benefits 4.18% 4.65% 4.72% 4.52% 4.52% 4.52% 4.52% 4.52%
Accrued expenses & other current liabilities 6.28% 6.72% 6.36% 6.45% 6.45% 6.45% 6.45% 6.45%
Accrued revenue share 2.89% 2.96% 3.11% 2.98% 2.98% 2.98% 2.98% 2.98%
Securities lending payable 2.30% 4.21% 3.24% 2.31% 2.04% 1.81% 1.63% 1.51%
Deferred revenue 1.78% 1.14% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05%
Income taxes payable, net 0.04% 0.15% 0.40% 0.25% 0.25% 0.26% 0.27% 0.27%
Total current liabilities 26.59% 25.46% 25.75% 22.75% 22.18% 21.68% 21.30% 19.54%
Long-term debt 3.74% 4.89% 2.66% 2.09% 1.84% 1.62% 1.45% 1.34%
Deferred revenue, non-current 0.23% 0.16% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Income taxes payable, net, non-current 4.41% 5.16% 4.88% 6.16% 6.37% 6.60% 6.73% 6.82%
Deferred income taxes 3.25% 2.99% 0.25% 2.82% 2.91% 3.02% 3.07% 3.12%
Other long-term liabilities 1.24% 1.69% 2.43% 1.79% 1.79% 1.79% 1.79% 1.79%
Total Liabilities 39.47% 40.35% 36.18% 35.80% 35.29% 34.90% 34.54% 32.80%
Class A & class B common stock, & class C capital stock & additional paid-in capital 43.33% 43.59% 43.98% 37.02% 31.05% 25.99% 22.01% 18.93%
Unrealized gains on cash flow hedges 0.10% 0.89% 0.35% 0.30% 0.27% 0.24% 0.21% 0.19%
Accumulated other comprehensive income (loss) 0.21% 0.04% -2.50% -2.20% -1.94% -1.71% -1.53% -1.41%
Retained earnings 102.40% 114.70% 118.98% 126.01% 132.80% 139.60% 148.35% 160.04%
Total stockholders' equity 145.94% 158.33% 160.46% 160.83% 161.91% 163.88% 168.83% 177.57%
Total Liabilities and Equity 185.41% 198.68% 196.64% 196.63% 197.20% 198.78% 203.37% 210.37%

Present Value of Operating Lease Obligations (2015) Present Value of Operating Lease Obligations (2014) Present Value of Operating Lease Obligations (2013) Present Value of Operating Lease Obligations (2012)
Operating Operating Operating Operating
Fiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases Fiscal Years Ending 0.0425 Leases Fiscal Years Ending 1607.09522470582 Leases
2016 646 2015 598 2014 499 2013 466
2017 781 2016 622 2015 477 2014 453
2018 792 2017 634 2016 438 2015 417
2019 766 2018 596 2017 418 2016 362
2020 716 2019 576 2018 370 2017 326
Thereafter 3705 Thereafter 3157 Thereafter 1836 Thereafter 1595
Total Minimum Payments 7406 Total Minimum Payments 6183 Total Minimum Payments 4038 Total Minimum Payments 3619
Less: Interest 1218 Less: Interest 1033 Less: Interest 622 Less: Interest 546
PV of Minimum Payments 6188 PV of Minimum Payments 5150 PV of Minimum Payments 3416 PV of Minimum Payments 3073
Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases
Pre‐Tax Cost of Debt 3.37% Pre‐Tax Cost of Debt 3.37% Pre‐Tax Cost of Debt 3.37% Pre‐Tax Cost of Debt 3.37%
Number Years Implied by Year 6 Payment 5.2 Number Years Implied by Year 6 Payment 5.5 Number Years Implied by Year 6 Payment 5.0 Number Years Implied by Year 6 Payment 4.9
Lease PV Lease Lease PV Lease Lease PV Lease Lease PV Lease
Year Commitment Payment Year Commitment Payment Year Commitment Payment Year Commitment Payment
1 646 624.9 1 598 578.5 1 499 482.7 1 466 450.8
2 781 730.9 2 622 582.1 2 477 446.4 2 453 423.9
3 792 717.0 3 634 574.0 3 438 396.5 3 417 377.5
4 766 670.9 4 596 522.0 4 418 366.1 4 362 317.1
5 716 606.7 5 576 488.0 5 370 313.5 5 326 276.2
6 & beyond 716 2837.2 6 & beyond 576 2405.7 6 & beyond 370 1410.8 6 & beyond 326 1227.0
PV of Minimum Payments 6187.6 PV of Minimum Payments 5150.3 PV of Minimum Payments 3416.1 PV of Minimum Payments 3072.5

Alphabet Inc
Value Driver Estimation
Marginal Tax Rate Calculation:
Federal Statuatory rate 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%
State income taxes, net of federal effect 1.00% 1.00% ‐1.00% ‐1.00% ‐1.00% ‐1.00% ‐1.00% ‐1.00%
Foreign rate differential ‐16.00% ‐12.00% ‐13.00% ‐13.00% ‐13.00% ‐13.00% ‐13.00% ‐13.00%
Marginal Tax Rate 20.00% 24.00% 21.00% 21.00% 21.00% 21.00% 21.00% 21.00%
EBITA Calculations:
Revenues 59825.00 66001.00 74989.00 85087.42 96666.05 109776.84 122341.41 132829.36
Less:Costs of revenues ‐ Motorola Mobile (hardware & other) 3865.00 ‐ ‐ 0.00 0.00 0.00 0.00 0.00
Less:Cost of revenues ‐ Google (advertising & other) 21993.00 25691.00 28164.00 31405.11 34799.11 38407.16 41997.30 44710.76
Less:Research & development expenses 7952.00 9832.00 12282.00 13935.96 15832.36 17979.69 20037.57 21755.33
Less:Sales & marketing expenses 7253.00 8131.00 9047.00 10354.47 11763.50 13358.98 14887.99 16164.29
Less:General & administrative expenses 4796.00 5851.00 6136.00 7389.16 8289.93 9348.05 10470.18 11644.93
Add:Implied interest on operating leases 103.54 115.12 173.56 208.52 248.09 295.18 351.19 417.84
EBITA 14069.54 16611.12 19533.56 22211.24 26229.26 30978.13 35299.57 38971.89
Less Adjusted Income Taxes:
Provision for income taxes 2282.00 3338.00 3561.00 0.00 0.00 0.00 0.00 0.00
Less: Tax on Interest Income (Expense) 106.00 183.12 61.11 163.91 166.55 167.64 168.74 169.84
Add: Tax Shield on charges related to Dept of Justice Investigation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Add:Tax Shield on implied interest on operating leases 20.71 27.63 36.45 43.79 52.10 61.99 73.75 87.75
Adjusted income Taxes 2196.71 3182.51 3536.34 ‐120.12 ‐114.45 ‐105.65 ‐94.99 ‐82.10
Add Change in Deferred Taxes:
DT Liabilities 1947.00 1971.00 189.00 2395.64 2815.29 3310.23 3759.29 4138.98
DT Assets 1526.00 1322.00 251.00 363.58 427.27 502.38 570.54 628.16
Net Deferred Taxes 421.00 649.00 ‐62.00 2032.06 2388.03 2807.85 3188.75 3510.82
Changes in DT ‐307.00 228.00 ‐711.00 2094.06 355.96 419.82 380.90 322.06
NOPLAT : EBITA ‐ Adjusted Taxes + Change in DT
NOPLAT 11565.84 13656.61 15286.23 24425.42 26699.67 31503.61 35775.46 39376.05
Operating Current Assets:
Operating cash assumption (of revenue ) 1196.50 1320.02 1499.78 1701.75 1933.32 2195.54 2446.83 2656.59
Accounts Receivable, net 8882.00 9383.00 11556.00 12618.49 14335.61 16279.94 18143.27 19698.64
Inventories 426.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Income Tax Receivables, net 408.00 1298.00 1903.00 1825.45 2145.22 2522.35 2864.53 3153.85
Prepaid revenue share, expenses & other assets 2827.00 3412.00 3139.00 3993.72 4537.19 5152.56 5742.30 6234.57
Operating Current Assets 13739.50 15413.02 18097.78 20139.42 22951.34 26150.40 29196.94 31743.65
Operating Current Liabilities:
Accounts payable 2453.00 1715.00 1931.00 2200.99 2500.50 2839.65 3164.66 3435.96
Accrued compensation & benefits 2502.00 3069.00 3539.00 3843.54 4366.56 4958.80 5526.36 6000.12
Accrued expenses & other current liabilities 3755.00 4434.00 4768.00 5488.99 6235.92 7081.70 7892.24 8568.82
Accrued revenue share 1729.00 1952.00 2329.00 2539.41 2884.97 3276.26 3651.25 3964.25
Deferred revenue 1062.00 752.00 788.00 894.12 1015.79 1153.56 1285.59 1395.80
Income taxes payable, net 24.00 96.00 302.00 208.55 245.09 288.17 327.27 360.32
Operating Current Liabilities 11525.00 12018.00 13657.00 15175.60 17248.83 19598.13 21847.36 23725.26
Other Operating Assets:
Prepaid revenue share, expenses & other assets, non‐current 1976.00 3280.00 3181.00 3549.43 4032.44 4579.36 5103.49 5541.00
Property & equipment, net 16524.00 23883.00 29016.00 33880.34 39728.73 46742.15 55136.43 65168.90
Intangible assets, net 6066.00 4607.00 3847.00 3302.90 2848.66 2489.51 2247.69 2108.46
PV of Operating Leases 3416.05 5150.29 6187.61 7361.84 8758.91 10421.10 12398.73 14751.66
Other Operating Assets 27982.05 36920.29 42231.61 48094.52 55368.74 64232.12 74886.35 87570.02
Other Operating Liabilities:
Capital lease obligation 246.00 236.00 0.00 0.00 0.00 0.00 0.00 0.00
Deferred revenue, non‐current 139.00 104.00 151.00 167.70 190.52 216.36 241.13 261.80
Income taxes payable, net, non‐current 2638.00 3407.00 3663.00 5243.49 6162.01 7245.31 8228.18 9059.23
Other long‐term liabilities 743.00 1118.00 1822.00 1521.81 1728.89 1963.38 2188.10 2375.68
Other Operating Liabilities 3766.00 4865.00 5636.00 6933.00 8081.42 9425.05 10657.41 11696.71
Invested Capital:
Invested Capital 26430.55 35450.31 41036.39 46125.34 52989.82 61359.33 71578.52 83891.70
Return on Invested Capital:
NOPLAT 11565.84 13656.61 15286.23 24425.42 26699.67 31503.61 35775.46 39376.05
Beginning Invested Capital 19862.50 26430.55 35450.31 41036.39 46125.34 52989.82 61359.33 71578.52
ROIC 58.23% 51.67% 43.12% 59.52% 57.89% 59.45% 58.30% 55.01%
Economic Profit: Begin IC * ( ROIC ‐WACC)
Beginning Invested Capital 19862.50 26430.55 35450.31 41036.39 46125.34 52989.82 61359.33 71578.52
ROIC 58.23% 51.67% 43.12% 59.52% 57.89% 59.45% 58.30% 55.01%
WACC 8.49% 8.49% 8.49% 8.49% 8.49% 8.47% 8.47% 8.45%
Economic Profit 9879.06 11412.07 12275.70 20940.51 22782.59 27018.01 30581.38 33330.32
FCF: NOPLAT+Change in Invested Capital
NOPLAT 11565.84 13656.61 15286.23 24425.42 26699.67 31503.61 35775.46 39376.05
Add: Beg Invested Capital 19862.50 26430.55 35450.31 41036.39 46125.34 52989.82 61359.33 71578.52
Less: Current Invested Capital 26430.55 35450.31 41036.39 46125.34 52989.82 61359.33 71578.52 83891.70
FCF 4997.78 4636.85 9700.15 19336.47 19835.18 23134.10 25556.28 27062.86

Weighted Average Cost of Capital (WACC) Estimation
Marginal Tax Rate 21.00%
Cost of equity Calculation
Risk Free Rate 2.23% (30 Yr Treasury Note)
+
Beta* 1.28
Market Risk Premium 5.00%
= Cost of Equity 8.62%
WACC Calculation  (2016‐2017)
Shares outstanding (Class C) 343.60
Shares outstanding (Class A) 294.80
MV of share (Class C) 759.66
MV of share (Class A) 788.48
=Total MV of Equity [E] 493463.08
MV of ST Debt (ST) 2219.00
MV of LT Debt (LT) 1984.00
PV of Operating Leases (OL) 6187.61
Cost of ST Debt 3.37% (Assuming Long Term Cost of Debt)
Cost of LT Debt 3.37%
Cost of Operating Leases 3.37% (Assuming Long Term Cost of Debt)
MV of equity 493463.08
+
MV of debt 10390.61
= MV of the firm [V] 503853.69
Cost of Equity * 8.62%
(E/V) 97.94%
+
Cost of ST Debt 3.37%
(1‐Marginal tax Rate) 79.00%
(ST/V) 0.44%
+
(LT/V) 0.39%
+
Cost of Operating Leases 3.37%
(OL/V) 1.23%
= WACC 8.49%
+
MV of debt 12753.91
(E/V) 97.48%
+
(ST/V) 0.44%
+
(LT/V) 0.35%
+
(OL/V) 1.73%
= WACC 8.47%
+
MV of debt 14393.73
(E/V) 97.17%
+
(ST/V) 0.04%
+
(LT/V) 0.35%
+
(OL/V) 2.44%
= WACC 8.45%
Alphabet Inc

Alphabet Inc
Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models
Key Inputs:
     CV Growth 3.50%
     CV ROIC 55.01%
     WACC(2016‐2017) 8.49%
     WACC(2018‐2019) 8.47%
     WACC(2020) 8.45%
     Cost of Equity 8.62%
Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E
DCF Model
Discount period 1 2 3 4 5
NOPLAT 24425 26700 31504 35775 39376
Continuing Value 745424
Free Cash Flow 19336 19835 23134 25556 27063
Net FCF 19336 19835 23134 770980
(Discounting Factor) ^‐1 1.0849 1.1771 1.2767 1.3848
PV of free cash flows 17823 16852 18120 556758
Value of Operations 609553
Non Operating Assets
Excess Cash 15049
Marketable Instruments 56517
Receivable under reverse repurchase agreements 450
Non-marketable investments 5183
Value of Non Operating Assets 71566
Non Operating Liabilities
PV of Operating Leases 6188
Total Debt 4203
PV of employee stock options 2838
Value of Non Operating Liabilities 13229
Equity Value 667890
Shares outstanding 690
Intrinsic Share Price (FY 15 End) $968
Intrinsic Share Price (Today) $1,025
EP Model
Periods to discount 1 2 3 4 5
Economic Profit 20941 22783 27018 30581 33330
Continuing Value 673845
Net  EP 20941 22783 27018 704427
(Discounting Factor) ^‐1 1.0849 1.1771 1.2767 1.3848
PV of Economic Profit 19301 19356 21162 508697
Initial Invested Capital 41036
Value of Operations 609553
Non Operating Assets
Excess Cash 15049
Marketable Instruments 56517
Receivable under reverse repurchase agreements 450
Non-marketable investments 5183
Value of Non Operating Assets 71566
Non Operating Liabilities
PV of Operating Leases 6188
Total Debt 4203
PV of employee stock options 2838
Value of Non Operating Liabilities 13229
Equity Value 667890
Shares outstanding 690
Intrinsic Share Price (FY 15 End) $968
Intrinsic Share Price (Today) $1,025

Alphabet Inc
Dividend Discount Model (DDM) or Fundamental P/E Valuation Model
Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E
EPS 26.15 30.70 36.14 41.08 45.32
Key Assumptions
   CV growth 3.50%
   CV ROE 13.18%
   Cost of Equity 8.62%
Future Cash Flows
     P/E Multiple (CV Year) 14.36
     EPS (CV Year) 45.32
     Future Stock Price 650.79
     Dividends Per Share 0.00 0.00 0.00 0.00 0.00
     Future Cash Flows 0.00 0.00 0.00 650.79
     Discounted Cash Flows 0.00 0.00 0.00 467.61
Intrinsic Value 467.61
Intrinsic Share Price (Today) 495.21

Alphabet Inc
Relative Valuation Models
EPS EPS
Ticker Company Price 2016E 2017E P/E 16 P/E 17
AAPL Apple Inc $103.13 $8.26 $8.86 12.5          11.6
MSFT Microsoft Corp $56.21 $2.90 $3.23 19.4          17.4
FB Facebook $127.10 $3.92 $5.02 32.4          25.3
TWTR Twitter $18.11 $0.50 $0.58 36.2          31.2
BIDU Baidu,Inc $182.10 $4.68 $6.59 38.9          27.6
YHOO Yahoo Inc $42.92 $0.49 $0.57 87.6          75.3
YNDX Yandex N.V $20.31 $0.65 $0.87 31.2          23.3
IAC IAC/InterActiveCorp $57.17 $2.58 $3.79 22.2          15.1
Average 35.1          28.4
GOOGL Alphabet Inc $788.48 $26.15 $30.70 30.2          25.7
Implied Value:
   Relative P/E (EPS16) $     916.61
   Relative P/E (EPS17) 871.04$

Alphabet Inc
Key Management Ratios
Liquidity Ratios
Current Ratio (Current Assets/ Current Liabilities) 458.17% 480.12% 466.67% 535.24% 554.82% 574.07% 594.95% 658.33%
Operating Cash Flow Ratio (Operating CF/ Current Liabilities) 117.29% 133.15% 134.77% 125.33% 119.42% 125.64% 129.49% 143.44%
Quick Ratio (Cash and other liquid assets) / Current Liabilities 369.10% 383.19% 378.38% 437.10% 454.18% 471.06% 490.14% 544.06%
Activity or Asset‐Management Ratios
Asset Turnover Ratio (Sales/Total Assets) 53.94% 50.33% 50.85% 50.86% 50.71% 50.31% 49.17% 47.54%
Receivables Turnover Ratio (Sales/Average Accounts Receivable) 713.60% 722.70% 716.26% 703.94% 717.26% 717.13% 710.81% 702.02%
Financial Leverage Ratios
Debt‐to‐Equity Ratio (Total Debt/Total Equity) 6.01% 5.01% 4.34% 2.92% 2.55% 2.22% 1.93% 0.85%
Equity Ratio (Total Equity/ Total Assets) 78.71% 79.69% 81.60% 81.79% 82.10% 82.44% 83.02% 84.41%
Profitability Ratios
Return on Assets (Net Income/Total Assets) 11.65% 11.01% 11.09% 10.76% 11.10% 11.40% 11.35% 11.13%
Return on Equity (Net Income/Shareholders Equity) 14.80% 13.82% 13.59% 13.15% 13.51% 13.82% 13.67% 13.18%
Gross Margin (Revenue‐COGS)/Revenue 56.78% 61.07% 62.44% 63.09% 64.00% 65.01% 65.67% 66.34%
EBIT Margin (EBIT/Sales) 23.34% 24.99% 25.82% 25.86% 26.88% 27.95% 28.57% 29.03%
Profit Margin (Net Income/Sales) 21.60% 21.88% 21.80% 21.15% 21.88% 22.66% 23.09% 23.41%
Payout Policy Ratios
NA NA 11% 9.89% 8.42% 7.16% 6.30% 5.72%
Payout Ratio (Dividend Payout Ratio) NA NA NA NA NA NA NA NA
Total Payout Ratio (Dividends paid + Repurchases)/NI

Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding
Number of Options Outstanding (shares): 4.85
Average Time to Maturity (years): 3.60
Expected Annual Number of Options Exercised: 1.35
Current Average Strike Price: 220.29$
Cost of Equity: 8.62%
Current Stock Price: $788.48
2016E 2017E 2018E 2019E 2020E
Increase in Shares Outstanding: 1.35 1.35 1.35 0.81 0.00
Average Strike Price: 220.29$       220.29$       220.29$       220.29$       220.29$
Increase in Common Stock Account: 297               297               297               178               ‐                (Assumes common stock and additional paid in capital are combined into one account).
Change in Treasury Stock 1,780 1,780 1,780 1,780 1,780
Expected Price of Repurchased Shares: 788.48$       856.41$       930.19$       1,010.32$    1,097.36$
Number of Shares Repurchased: 2.26              2.08              1.91              1.76              1.62
Shares Outstanding (beginning of the year) 690 689 689 688 687
Plus: Shares Issued Through ESOP 1.35 1.35 1.35 0.81 0.00
Less: Shares Repurchased in Treasury 2.26 2.08 1.91 1.76 1.62
Shares Outstanding (end of the year) 689 689 688 687 685

VALUATION OF OPTIONS GRANTED IN ESOP
Ticker Symbol GOOGL
Current Stock Price $788.48
Risk Free Rate 2.23%
Current Dividend Yield 0.00%
Annualized St. Dev. of Stock Returns 17.18%
Average Average B‐S Value
Range of Number Exercise Remaining Option of Options
Outstanding Options of Shares Price Life (yrs) Price Granted
ESOPS 4.85 220.29 3.60 585.18$ 2,838$
Total 5 220.29$ 3.60 585.18$ 2,838$

Alphabet_GOOGL

Recommended

Recommended

More Related Content

What's hot

What's hot (13)

Viewers also liked

Viewers also liked (11)

Similar to Alphabet_GOOGL

Similar to Alphabet_GOOGL (20)

Alphabet_GOOGL