Here’s how Alphabet could be worth $ 3,100 per share

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Alphabet Inc. faces increasing antitrust scrutiny, and while a forced breakdown of the company may not be imminent, it wouldn’t be an apocalyptic scenario either, according to a Bernstein analyst. In fact, Alphabet, Google‘s parent, is worth more divided, according to Bernstein analyst Mark Shmulik’s sum-of-the-parts assessment. His base case sum-of-the-parts calculation values ​​Alphabet at $ 2,600 per share, roughly 23% above current levels, while his bullish case, “without stretching estimates,” suggests that the company could be worth $ 3,100 per share.

“While we can debate the merits and odds of breaking big technology, we believe the nuclear scenario is possibly an added value for Google,” he wrote. “And therein lies the relative cushion for owning Google amid increasing scrutiny of big technology.” Read: In Google’s antitrust effort, authorities may have saved the best for Alphabet’s latest search business which accounts for most of the company’s value in Shmulik’s sum-of-the-parts valuation, at $ 1,499 per share in the base case and $ 1,651 per share in the bull case. But he also sees potential in “under-monetized assets on YouTube and Maps, a global market-leading app store, and a Cloud franchise gaining share.” The opportunities in these businesses “highlight that there is much to love about this business, together or separately.” Base case math attributes a valuation per share of $ 1,499 for search, $ 61 for Alphabet’s network business, $ 382 for the company’s YouTube business, $ 335 for Google Cloud business, $ 140 for hardware and the gaming business, and $ 75 for the “other bet on business, while subtracting $ 85 per share of unallocated expenses and adding $ 190 per share of cash minus debt. See also: Big Tech CEOs criticized the role of social media in promoting misinformation and extremism. play and $ 113 for other bets. In this model, you also subtract $ 85 per share for unallocated expenses and add $ 150 per share for cash minus debt. Shmulik too has a bearish case scenario of $ 1,700 per share based on this methodology, and this model, among other things, attributes a negative value to the collection of “other bets” businesses, which includes the autonomous unit Waymo and previous companies. -Business scenic ace. Still, he says, “it’s hard to believe that we won’t see Waymo gain some value on the open market given [driverless-car company] Cruise recently raised at a valuation of ~ $ 30 billion. “While Shmulik said he and his team” do not expect a forced divestment by the regulator anytime soon, “there is a possibility that Alphabet will consider an” opportunity to ease the pressure “if you see one.” If there was anywhere we could point to about selling an asset, the networking business is where we would look, “he wrote. This part of the business, which includes ad exposure like Google AdSense and DoubleClick Ad Exchange faces some business risks as cookies become less dominant. Shmulik has a $ 2,500 price target on Alphabet stock and a superior performance rating. The stock is up 20% over the past three months, already that the S&P 500 has gained 6.7%.