Give it another 10 years, I reckon Google will be the biggest business in the world by far, by market cap.
They will leave Facebook, Apple, Microsoft and Amazon in their dust.
Here are these tech companies market caps with PE ratios in bracket:
Apple - US$814bn (18.5)
Alphabet (Google) - US$636bn (30.8)
Microsoft - US$558bn (32.0)
Facebook - US$486bn (42.6)
Amazon - US$460bn (180.5)
Google are just run so damn well. Brin and Page are young, smart and ambitious, and they’re the founders, which doesn’t apply to the leadership of Apple and Microsoft. I explain the importance of this here.
In Google’s early days, they set out to dominate search without knowing how they’d make money. AdWords wasn’t as obvious then as it is now. But Brin and Page knew all along that if they could dominate search they’d monetise somehow.
And that has been how they’ve approached everything they’ve gone into. They don’t care about the money as the money will eventually come when they dominate. So they think damn long-term, and their current revenues thus don’t reflect how well they’re actually doing.
Chromebook, Android, Google Docs, YouTube, Gmail, their leadership in self-driving cars are all seeds that Google have planted, that will make them huge returns at some point. They’re patient.
I mean, despite going in well after Apple into the smartphone arena, they now run 82% of the world’s smartphones. An absolutely incredible achievement. They knew this was a space they had to dominate at whatever short-term cost. And just imagine how much money they’ll make from this in the coming decades.
The fact that Google trades at a broadly similar PE to Microsoft just shows how short-sighted Wall Street can be…