Apigee-API-Engineer helper - Google Cloud Apigee Certified API Engineer Updated: 2024
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Exam Code: Apigee-API-Engineer Google Cloud Apigee Certified API Engineer helper January 2024 by Killexams.com team
Apigee-API-Engineer Google Cloud Apigee Certified API Engineer
The Google Cloud Apigee Certified API Engineer (Apigee-API-Engineer) test is designed to validate the knowledge and skills of individuals in designing, building, and managing APIs using the Apigee API platform. Here are the test details for the Apigee-API-Engineer certification:
- Number of Questions: The test typically consists of multiple-choice and multiple-select questions. The exact number of questions may vary, but typically, the test includes around 50 to 60 questions.
- Time Limit: The time allocated to complete the test is 2 hours.
The Apigee-API-Engineer certification course covers various courses related to API engineering using the Apigee platform. The course outline typically includes the following areas:
1. Introduction to API Engineering:
- Understanding the role and importance of APIs in modern application development.
- Overview of the Apigee API platform and its features.
2. API Design:
- Designing RESTful APIs using best practices and industry standards.
- Implementing API design principles, such as resource modeling, versioning, and documentation.
3. API Security:
- Implementing authentication and authorization mechanisms for API access.
- Applying security controls, such as OAuth, API keys, and JWT tokens.
4. API Development and Implementation:
- Developing APIs using the Apigee Edge platform.
- Configuring API proxies, message transformation, and traffic management.
5. API Analytics and Monitoring:
- Implementing API monitoring and analytics using Apigee Edge.
- Generating reports and analyzing API usage patterns.
6. API Lifecycle Management:
- Managing the lifecycle of APIs, including versioning, deprecation, and retirement.
- Implementing change management processes and ensuring backward compatibility.
The objectives of the Apigee-API-Engineer test are as follows:
- Assessing candidates' understanding of API design principles and best practices.
- Evaluating candidates' ability to implement API security measures and manage access controls.
- Testing candidates' knowledge of API development and implementation using the Apigee platform.
- Evaluating candidates' proficiency in API analytics, monitoring, and lifecycle management.
The specific test syllabus for the Apigee-API-Engineer certification covers the following topics:
1. API Engineering Fundamentals
2. API Design
3. API Security
4. API Development and Implementation
5. API Analytics and Monitoring
6. API Lifecycle Management
|Google Cloud Apigee Certified API Engineer
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Google Cloud Apigee Certified API Engineer
Which features are supported in the OAuthV2 policy? Choose 3 answers
A . Storing of external access tokens
B . Setting custom attributes for generated access tokens
C . Credentials validation when password grant type is used
D . Setting different expiration for refresh and access tokens.
Which feature can be used to automatically distribute traffic across multiple target servers?
A . use a concurrent rate limiting policy
B . use a LoadBalancer entry in the HTTPTargelConnection session
C . use RouteRules with multiple TargetEndpoints
D . use an AssignMessage policy
Which are characteristics of the PopulateCache and ResponseCache policies? Select all that are correct
A . PopulateCache has a TimeOfYear expiry option
B . PopulateCache allows you to cache any string object.
C . ResponseCache has separate policy definitions for Lookup vs. Populate cache operations.
D . ResponseCache caches the complete HTTP response (including headers).
You need to make multiple target system calls in parallel for a single inbound request The response should return to
the client app as a single object.
What should you do?
A . Use Apigee service callouts
B . Create route rules for each target endpoint
C . Create multiple target proxy xmls for each endpoint
D . Use the Node JS async module to invoke target systems
If a string value is put in both a cache and a key value map (KVM) using the same key, which one is true?
A . The object will expire from both locations after the TimeToLive has passed.
B . The object will be stored in Cassandra twice
C . When object is retrieved from KVM, the object with the same key will be returned from the cache instead to
D . One of the inserts (either to cache or to KVM) will fail as you cant insert the same key twice
Each app is assigned to exactly one product.
You need to limit the number of requests during weekends for specific products without modifying this design.
What should you do?
A . Add custom attributes for counts for every product. Create custom quota policies for every product which
references these custom attributes
B . Set custom attributes for weekday and weekend count at every product Reference these How variables in the count
property of Quota policy at runtime
C . Add custom attributes at the API Product with counts to use for weekdays and weekends. Using flow variables,
reference the custom counts in the Quota policy
D . Add custom attributes for count at Product level Use a JS Policy to determine which count to use in Quota policy
at runtime Use this count attribute in the Quota Policy.
You have a single back end that needs to be exposed to customers using different API request and response payloads
You need to allow these different request types without breaking existing implementations.
What should you do?
A . Create a new API proxy for new customers and invoke backend target system with required parameters.
B . Configure the API as a pass-through proxy and invoke backend target system with client request parameters.
C . Create a new proxy xml and base path with upgraded version and invoke backend target system with required
D . Include a new customer requirement in an existing API proxy and invoke backend target system with required
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Google has reached a deal in a class-action lawsuit accusing it of making an Orwellian grab of âpotentially embarrassingâ data from tens of millions of people using the companyâs âIncognito modeâ and other private browsing, according to a court filing.
The three Californians and two others who sued the Mountain View digital-advertising giant on behalf of themselves and legions of other internet users in 2020 claimed the firm captured the data despite sayingÂ it would not.
Google, in a bid last year to get the case thrown out, argued in a court filing that it ânever made any such promise.â
The plaintiffs were seeking for themselves and other affected internet users the return of what they claim are billions of dollars in profits Google made from the browsing data, plus unspecified damages of more than $5,000 for each plaintiff and affected user. In December 2022, a judge denied the plaintiffsâ attempt to entitle tens of millions of users to receive damages in the case.
The terms of the settlement, which must be approved by a judge, were not revealed in the joint court filing last week by both sides informing the court about the deal. Two days after the filing, Judge Yvonne Gonzalez Rogers cancelled the trial planned for Jan. 29.
The lawsuit filed in Oakland U.S. District Court alleged that Googleâs data practices gave it and its employees âpower to learn intimate details about individualsâ lives, interests, and internet usage.â The company, the lawsuit claimed, âknows who your friends are, what your hobbies are, what you like to eat, what movies you watch, where and when you like to shop, what your favorite vacation destinations are, what your favorite color is and even the most intimate and potentially embarrassing things you browse on the internet â regardless of whether you follow Googleâs advice to keep your activities âprivate.ââ
âGoogle has made itself an unaccountable trove of information so detailed and expansive that George Orwell could never have dreamed it.â
In August, Gonzalez Rogers issued an order agreeing with the plaintiffs that anyone using Incognito mode in Googleâs Chrome browser could reasonably deduce from the opening screen that Google would not take their data. The companyâs âSearch & Browse Privatelyâ help page â for users of Chrome and other browsers including Safari â said, âyouâre in control of what information you share with Google when you search,â the judge noted.
Although Google had represented publicly since mid-2016 that it would not collect user information during purportedly private browsing, Gonzalez Rogers wrote that the firm âdid so anyway, collecting, aggregating, and selling plaintiffsâ private browsing data without their consent.â
Even when people used private modes or Incognito in other companiesâ browsers, when they visited a website using Google services, the companyâs software directed the userâs browser âto send a separate communication to Google,â Gonzalez Rogers wrote in her August order.
Google and the plaintiffs â Chasom Brown, Christopher Castillo and Monique Trujillo of California, William Byatt of Florida and Jeremy Davis of Arkansas â earlier agreed that the class of people using private browsing modes since mid-2016 numbers in the tens of millions, the judge noted in an earlier order.
The plaintiffs claimed that Google linked usersâ private browsing history to the user profiles the company builds for targeted advertising. Google denied making those connections, Gonzalez Rogers said.
Evidence submitted by the plaintiffs included internal Google communications stating that Google stores usersâ regular and private browsing data in the same logs, uses those âmixed logsâ to send users personalized ads, and that even if individual data points are anonymous on their own, that Google could aggregate them to identify specific users with a high probability of accuracy, the judge wrote.
In a statement to this news organization last year, Google said it strongly disputed the lawsuitâs claims. The firm said Incognito in Chrome gave users âthe choice to browse the internet without (their) activity being saved to (their) browser or device,â but declined to address the claims that the company could identify users by mixing private and ordinary browsing data.
Gonzalez Rogers in a December 2022 ruling cited evidence introduced by Google indicating usersâ awareness of the companyâs private-browsing data harvesting varied widely. The judge declined to allow tens of millions of users to be certified as a class for the purpose of receiving any damages payments. But Gonzalez Rogers did certify those users as a class regarding the plaintiffsâ demand for a court order barring Google from âintercepting, tracking, or collectingâ data from usersâ private browsing.
The joint court filing last week said Google and the plaintiffs reached the deal through mediation, and that they expected to present the settlement agreement for court approval by late February.
Higher education leaders are familiar with difficult conversations. Theyâre an important part of leadership, after all, and administrators need to make hard choices every day as part of the delicate balance of institutional priorities, student success, employee welfare, budgets, security and so much more.
In the higher ed IT world, one ongoing difficult conversation revolves aroundÂ managing cloud storage. The syllabu has been top of mind sinceÂ GoogleÂ announced in late 2021 that it would beÂ doing away with unlimited free cloud storageÂ forÂ Google Workspace for EducationÂ users.
The decision was disappointing but inevitable. As the cost of cloud storage rises and the amount of data being stored by college students, researchers and institutions grows exponentially, the free model is unsustainable.
Predictably, other cloud storage providers have followed Googleâs move, most significantly Â Microsoft, which also has a major footprint in higher education. Microsoft 365 Education customers will beÂ limited to 100TB of free storageÂ starting with their next contract renewal, provided that contract renewal comes no sooner than Aug. 1, 2024.
EdTechÂ has covered the cloud storage crunch in depth and offered potential solutions for institutions looking toÂ clean up their databases,Â reduce their cloud data consumptionÂ and evenÂ rein in alumni accountsÂ eating into a universityâs allotment.
But what about the most important people on campus: students? Once accustomed to storing anything they wanted â school-related or not â in the Google accounts associated with their university credentials, students are now having their storage space squeezed by university-imposed user limits. Understandably, theyâre less than enthused. So, what can higher education institutions do to guide students through this change, and where do institutions need to draw a line to ensure that precious cloud storage space is being used only for educational purposes?
Students Wonât Like Storage Limits, and Thatâs OK
No user likes limits on what they can save or back up, andÂ students are likely to ventÂ when their institutions crack down. That doesnât mean universities shouldnât act. Over time, storage limits will become the norm, alongside the litany of other tech and nontech regulations students abide by during their college careers.
The day institutions implement these storage limits wonât be pleasant, though, and colleges should be prepared to respond to questions and complaints. Students who have either knowingly or unknowingly been hogging gigabytes of cloud data with all kinds of files, or who are syncing their personal computers or smartphones to back up to their .edu-connected accounts, will have to take action to get below individual storage limits.
As with many things, clear communication is a great first step to tamp down some of the initial shock. Sharing why the decision has been made can help students understand the change. Offering an appropriate timeline, something like six months or so, gives students ample time to adjust how theyâre storing data but still creates urgency. No matter how long the sunset period a university offers users, overcommunicating should be the goal so that no one can say they werenât given fair warning.
Itâs also key to offer students resources on how to become compliant. Many universities that have limited student storage have already done this; for example,Â Syracuse UniversityÂ provides links onÂ how to analyze and clear unnecessary data, including through services such as Google Takeout. Institutions can also notify users who exceed a proposed storage limit by using tools like Googleâs Investigation Tool, available to all institutions with a Google Workspace for Education Plus license.
Above all, limiting user storage will require a mentality shift for all users, and it can be summed up plainly enough: Anything that isnât part of your educational journey shouldnât be stored on your educational account.
If It Doesnât Have to Do with Education, It Shouldnât Be Stored Here
Creating clear and well-defined user policies and permissions is great practice no matter what university IT teams are doing. Itâs no different when it comes to managing cloud storage. For most students, that policy can be as straightforward as mentioned above, but it still bears repeating: If something is being stored, backed up or authenticated through your university account, it must be university related.
IT leaders at colleges around the country can tell all kinds of horror stories: students backing up catalogs of full-length movies to their cloud drives, or users authenticating their profiles on clearly noneducational apps â say, Tinder â to their university accounts. Whether students are doing so intentionally or unknowingly, having a clear policy in place makes it easy for institutions to direct students who are over the limit on what can stay and what should go.
Understanding this distinction helps prepare students for life after college too. Businesses, many of which never had access to free unlimited storage as educational institutions once did, have long had these types of policies in place, and no employee would think it wise to back up their photo library to their companyâs cloud â at least not without consequences.
There will, of course, be cases where students need to exceed storage limits. Those studying filmmaking, for example, are likely to have terabytes of raw footage that they need to store for class projects. The same could go for student-athletes tasked with studying game film or students working onÂ grant-driven research projects.
For these students, setting up permissions within the universityâs cloud provider can ensure that extra storage is available to those who need it. It helps to consider these types of students from the beginning when setting up storage quotas. Making sure that students themselves or someone who is focused on the end-user experience is in the room during these initial discussions is a good idea.
This article is part ofÂ EdTech: Focus on Higher EducationâsÂ UniversITy blogÂ series.
When I wrote my initial thesis about Google (NASDAQ:GOOGL), I was cautious, and that did not age well as the stock outperformed the broader U.S. market since mid-May. A lot happened since then, and today, I want to update my thesis about Google. While I believe that Google lags behind its primary rivals in the cloud and artificial intelligence [AI], its presence in these fields is also substantial. But what is more important is that the company's primary business is growing and experiencing secular tailwinds, which allows it to Excellerate profitability. The company is well-positioned to continue investing heavily in innovation and expanding its vast ecosystem. Furthermore, my valuation analysis suggests the stock is very attractively valued. All in all, I assigned Google a "Strong Buy" rating.
The latest quarterly earnings were released on October 24, when the company topped consensus estimates. Since earnings went live more than two months ago, I will not waste much of readers' time and will underline that revenue grew by a solid 11% YoY, and the adjusted EPS expanded notably, from $1.06 to $1.55.
The balance sheet is a fortress with a cash position of $120 billion as of the latest reporting date. There is almost no leverage, and the company is in a massive $90 billion net cash position, which gives GOOGL vast room to continue investing heavily in both in-house R&D and strategic acquisitions. That said, the company's strong balance sheet positions the company well to unlock new revenue drivers with the help of acquisitions.
Google has a stellar record of acquisitions, including YouTube, Android, Maps, etc. Bears would argue that past successful reinvestments are not a certain of future success, and I agree with it. However, consistent historical success substantially increases the probability of new economically sound strategic moves. Google has been a true superstar in generating superior returns over the long term, with ROIC consistently above 20% over the last decade. The company's ROIC performance looks stellar compared to its cost of capital. Thus, I am highly convinced of Google's capabilities to reinvest in highly profitable projects.
Fiscal 2023 full-year revenue is projected by consensus at $305.77 billion, which will mean an 8.1% YoY growth. These expectations look conservative enough since, for the first nine months of 2023, Google demonstrated a 7% YoY growth. With the holiday Q4 being historically by far the strongest, I believe that a projected 8.1% YoY revenue growth is doable for the full fiscal year. Apart from the solid revenue dynamic, I like that profitability metrics are improving, with Q2 and Q3 being more vital on a YoY basis from the operating margin perspective. I do not compare Q1 on a YoY basis because Q1 of 2022 mostly did not capture the adverse effects of the rapidly deteriorating macro environment, and Q1 of 2023 included substantial severance costs after massive layoffs in early 2023. That said, the financial performance is improving this year, but still, the operating margin is below 2021 levels and there is still room to improve.
The earnings for the upcoming quarter are scheduled for release on February 1, 2024. Consensus estimates forecast quarterly revenue at $85.13 billion, which indicates a 12% YoY growth. As the revenue growth pace is expected to accelerate, the bottom line is expected to follow. Consensus estimates project a substantial adjusted EPS expansion from $1.05 to $1.61.
I share Wall Street's analyst's positive view of Google's near-term prospects. As Google remains by far the most used search engine in the world and YouTube is the unmatched leader among video streaming platforms, the company's position in digital advertising is intact. According to GOOGL's latest 10-K report, this revenue stream represents 80% of the total, which means that the company's performance is significantly affected by the digital advertising industry. From the advertising industry perspective, Google has solid tailwinds behind its back. Precedence Research expects the digital advertising market to compound at a 9.7% CAGR over the next decade, and Google will likely be the major beneficiary of this growth.
Google's dominance in digital advertising allows the company to benefit from vast pricing power and generate unmatched profitability. This makes the company well-positioned to build up a fortress financial position to be utilized to invest heavily in growth. I am not emphasizing much the latest generative AI update from Google and would prefer to look at how this will unfold in competing against a generative AI star, ChatGPT. I will discuss later in the "Risks to consider" section the fact that Google is lagging behind rivals in cloud computing and AI. Still, the company's presence in the global cloud computing market is notable, and Google will apparently absorb positive secular tailwinds here as well. It is also important to understand that Google has an extensive ecosystem, and users have very high switching costs if they want to change the ecosystem of services they use. That said, Google is willing to add new products and features to its ecosystem, which will highly likely provide synergetic effects.
Substantial profits generated by the company's cash cow, digital advertising, provide the company vast opportunities to invest in various projects across different industries which might unlock new revenue sources for decades. The project that I consider the closest to becoming a big long-term winner for Google is the company's self-driving taxi subsidiary, Waymo. The industry is in its nascent stages, but driverless ride-sharing looks inevitable on the horizon for multiple decades as the shift to cleaner energy emerges. Waymo's strategic partnership with Uber (UBER), the absolute leader in ride-sharing in the U.S., makes the company firmly positioned to absorb the projected 69% industry CAGR for the next decade. Autonomous taxis might sound like something unreal, but Waymo Driver is already available in Metro Phoenix, San Francisco, and Los Angeles. Having a firm pole position in the autonomous ride-sharing industry makes Google well-positioned to eventually become the dominant player in the global ride-sharing industry, expected to hit more than half a trillion USD over the next decade. It is difficult to project the pace of autonomous ride-sharing penetration across the world, but it will be fairly conservative to assume that Waymo will be able to capture 10% of the global ridesharing industry, which will mean an additional $50 billion in revenue per annum over the long run. Given the company's historical P/S ratio of around 6, an additional $50 billion in revenues could potentially add $300 billion to the business's fair value. However, the level of uncertainty is extremely high here, given the nascent stage of Waymo's monetization.
It is important to emphasize that apart from having bright prospects for the top line, the management also prioritizes financial discipline. The company was one of the first big tech companies to start headcount optimization around a year ago. This was painful for employees but beneficial for shareholders as profitability metrics improved. Therefore, I look optimistically at the latest rumor that the company might cut another 30 thousand jobs in 2024, which could highly likely be a solid contribution to the company's profitability boost. This year's 12 thousand job cuts allowed the company to expand its operating margin by more than one percentage point. That said, a potential 30 thousand jobs cut could make the operating margin much closer to the stellar 30% operating margin level.
With such strong revenue growth opportunities together with notable room to Excellerate profitability via headcount optimization, it is not surprising to me that high-profile investment firms like Needham and Wedbush have put GOOGL in their 2024 top picks lists.
GOOGL rallied by almost 57% over the last 12 months, significantly outperforming the broader U.S. stock market. Seeking Alpha Quant assigns the stock a low "D" valuation grade because its ratios are substantially higher than the sector median. But Google's market positioning is unmatched, and I think it will be more fair to compare Google vs Google, i.e., with historical averages. From that perspective, the stock looks fairly valued because current valuation metrics are close to historical averages across the board.
I want to go ahead with the discounted cash flow [DCF] simulation. I use a 9.3% WACC for discounting, as recommended by valueinvesting.io. This is 70 basis points lower than I did during my previous analysis, which looks fair to me given the expected pivot in the Fed's monetary policy in 2024. Consensus revenue estimates project a moderate 9% CAGR for the next decade, which I consider conservative enough for my calculations given the company's strong positioning in promising industries. I use a 13.9% TTM FCF margin ex-SBC and project a 75 basis points yearly expansion. I consider the FCF margin expansion as fair given historical trends and the management's prioritization of financial discipline.
According to my DCF simulation, the business's fair value is $2 trillion. This is around 16% higher than the current market cap, which means the stock is undervalued. That said, my target price for GOOGL is around $162.
When I conducted a DCF simulation for Google last time in May, the business's fair value was indicated to be around $1.6 trillion. The 20% increase in my fair value estimate occurred due to several positive developments. First, I implemented a 70 basis points softer WACC because, in late 2023, the Fed shared the expectation that three rate cuts would take place in 2024. Second, I used a conservative FY 2022 level FCF margin in May. However, Google's profitability rebounded faster than expected, and this time, I used a TTM FCF margin level, which I consider fair enough. Last but not least, consensus revenue estimates upgraded due to the faster-than-expected recovery in digital advertising. That said, I believe that all the changes I have incorporated into my DCF simulation are sound in light of the improving financial performance and macro environment.
The company faces significant antitrust issues given Google's dominant position in digital advertising and search advertising. Google's presence in these industries is overwhelming, and the company faces accusations of using its dominance to stifle competition. For example, just last month, Google lost an antitrust lawsuit filed by Epic Games. Last year, the company was fined over $4 billion for breaching the European antitrust rules. While $4 billion might not be as significant considering the company's hyper-scale, apart from financial losses, Google's reputation also gets hurt as a result of lost antitrust lawsuits.
While I believe that Google is positioned to benefit from secular shifts in cloud computing and AI, it is important to highlight that the company competes with other superstars like Microsoft (MSFT) and Amazon (AMZN) in these fields. And Google lags behind both of its major rivals. AWS is an undisputable global leader in the cloud industry, but Google's Cloud also significantly lags behind Microsoft's Azure, which is in second place. While Google's third place looks intact, it is quite unlikely that it will be possible for the company to close the gap with leaders because both MSFT and AMZN also have vast resources and expertise to continue investing in innovation. I would also like to highlight that when in early February ChatGPT already reached 100 million users, Google's Bard generated errors. This also indicates that in terms of AI Google is behind Microsoft's partner, OpenAI.
To conclude, Google is a "Strong Buy". My valuation analysis suggests that the global digital advertising leader is around 16% undervalued, which I consider a gift. I want to emphasize that a company like Google, with its dominating market positioning and stellar profitability, deserves a substantial premium to its fair value. That said, the 16% upside potential is the most conservative scenario while the stock price might appreciate much higher depending on massive factors like the Fed's monetary policy. The company's strong balance sheet and massive profitability from digital advertising provide vast opportunities to invest heavily in growth and innovation, both via in-house projects and strategic acquisitions. The company's prospects in autonomous ride-sharing look very bright as Waymo has started expanding its presence at a notable pace in 2023.
While not without risks, Alphabet (NASDAQ:GOOGL) should be considered a core tech holding. The stock currently looks undervalued compared to its mega-cap tech peers.
GOOGL owns a variety of products we use every day. Its Google search engine holds a virtual monopoly for search with an estimated over 90% global market share. Google Search generated nearly $162.5 billion in advertising revenue in 2022 and $127.0 billion through the first 9 months of 2023.
Its YouTube video platform, meanwhile, is one of the largest in the world. It generated $29.2 billion in revenue in 2022 and $22.3 billion through the first 9 months of 2023. Unlike other media platforms, it doesnât have to spend a lot on upfront content costs, instead using a revenue-sharing model with content creators. YouTube Music and Premium surpassed 80 million subscribers as of the last reported numbers in 2022.
The company also serves up ads through its targeted advertising technology via Google Network, which includes AdSense, AdMob, and Google Ad Manager. Through these programs, the company will serve ads to client websites or apps based on their content, geographical location, and other factors. Google Networks generated $32.8 billion in revenue in 2022 and $23.0 billion through the first 9 months of 2023.
Google Cloud is the #3 cloud infrastructure company behind leaders AWS, owned by Amazon (AMZN), and Microsoft (MSFT) Azure. It generated $26.3 billion in revenue in 2022 and $23.9 billion through the first 9 months of 2023.
In addition, GOOGL owns the Android operating system, Gmail, the Chrome web browser, Google Classroom, navigation platforms Maps and Waze, and Google Photos, among others. It also has a hand in hardware with its Pixel smartphone, smart home product line Nest, Chromebook, and streaming device Chromecast.
Finally, it is working on some more pie-in-the-sky projects such as self-driving cars (Waymo), quantum computing (Sycamore), and smart cities (Sidewalk Labs).
Opportunities & Risks
GOOGL has a virtual monopoly in search, which should continue to be a growth engine for the foreseeable future. Its ability to deliver performance-based ads, as opposed to brand ads, is really unmatched by most rivals.
Performance-based ads are bottom of the funnel and tend to be more resilient compared to brand advertising. They have a much more direct and measurable correlation to sales, so companies like to use this type of advertising, especially when there are more concerns around the consumer. Performance advertising has also been getting a boost from the big pushes of Chinese companies like Temu, owned by PDD (PDD), and Shein, which have been trying to draw in U.S. consumers with cheap deals.
Another big opportunity for GOOGL is the monetization of YouTube Short videos. With an estimated 2.7 billion active users, YouTube is already quite large. Previously, Short creators had no options to earn money from producing videos, unlike with YouTubeâs long-form videos. Starting in 2023, GOOGL started sharing 45% of ad revenue with creators on its Partner Program. To qualify, creators must have 1,000 followers and 10 million Short views over 90 days. Revenue will be allocated to creators based on their share of Short views.
The goal here is to incentivize creators to produce content for YouTube Shorts to compete with TikTok. Meanwhile, the better the community performs as a whole, the more money creators can earn. It is also worth noting that creators will be allowed to monetize their content when using popular music, which has been a sticking point in the past.
So far, YouTube Shorts appears to be working. In July, the company noted that Short video watchers had risen from 1.5 billion to 2.0 billion in a year. Meanwhile, in October, the company said Shorts averaged 70 billion views a day and that the company was working on closing the monetization gap between long form and short form videos.
Google Cloud is another opportunity for the firm. Cloud continues to be one of its strongest top-line drivers, growing around 26% so far in 2023. It has yet to turn a full-year profit yet, although it is on track to do so this year. Itâs a high fixed-cost business and GOOGL is the #3 player, so it continues to need to scale the business. If Google Cloud can continue its momentum, it should be a nice bottom line driver moving forward as well.
One area that GOOGL has heavily invested in is artificial intelligence ("AI") and machine learning ("ML"). Itâs looking to use this tech across the company, both with search, cloud computing, and other areas. Some particular areas of focus are translation, computer vision, and natural language processing.
Discussing AI at a Scotiabank Conference last month, CTO of Google Cloud Will Grannis said:
While AI is an opportunity for GOOGL it is also a risk. OpenAI's ChatGPT got a lot of buzz in 2023, and rival MSFT made a $10 billion investment into the AI firm and incorporated its tech into its products, including Azure, Microsoft 365, and its search engine Bing. That upped the game and may have rushed GOOGL into an AI race before it wanted to be in one.
The biggest risk from AI likely isnât MSFT and ChatGPT, but from GOOGL cannibalizing its own revenue. If users can get information they need directly from Google without having to visit websites, it could potentially lead to less clicks on relevant ads. The counter argument is that it could lead to more use of the Google search engine, and that Google could benefit from more impressions while the company could create new forms of ads to benefit from AI answers.
Outside on AI and technology disruption, the macroeconomy is another risk. As a leader in search and video, GOOGL makes the bulk of its money from advertising. As such, the company isnât immune to a slowdown in ad spending. Unlike in the past where the secular trend could easily outpace any macro weakness, that isnât necessarily the case anymore.
Meanwhile, while Google Cloud has started to turn profitable, there is no certain that this will continue. You have three huge companies fighting for market share that could be willing to compete on price if necessary. AMZNâs AWS growth and operating margins have both fallen so far this year. Through the first 9 months to the year, its operating margins were 26.2% versus 30.0% last year. Growth so far in 2023, meanwhile, was 11% versus 32% during the same period in 2022. There is no doubt AMZN will try to fight back, and it has shown a willingness to sacrifice some margin to do so in the past.
Regulation is another risk. The company has paid out a number of accurate legal settlements recently. It recently agreed to pay $700 million and allow developers to offer direct payments on its Play app. It also settled a $5 billion lawsuit, terms not disclosed, in a privacy lawsuit because it tracked people who were viewing in private modes. Late last year, it reached a $391.5 million settlement with 40 states related to tracking personal data.
The big risk, though, is the current DOJ case against the company that it is a monopoly that illegally used its power to its benefit. A loss could lead to a huge fine, a change in business practices, and a damage to brand reputation. It also would likely be followed by a similar case in Europe. Legal risks are always among the most difficult to quantify.
GOOGL currently trades at about 11.5x 2024 EBITDA estimates of $139.9 billion. Stripping out its approximately $4.5 billion in losses on Other bets, the core business is only trading a 11.2x EBITDA.
Based on the current 2025 EBITDA consensus of $158.3 billion, the stock trades at a 10.2x multiple.
Revenue is projected to grow 11.3% in 2024 and 10.9% in 2025.
The company has rebounded well this year, with revenue growth accelerating through the year, up 6% in constant currencies in Q1, 9% in Q2, and 11% last quarter. It also expanded its operating margin to 28% in Q3 from 25% a year ago.
GOOGL currently has a free cash flow yield of about 4.4% based on FCF of $77.5 billion in the last trailing twelve months.
GOOGL is among the cheaper mega-cap tech stocks.
To get to a year-end 2024 fair value, Iâd place between a 12-15x multiple of 2025 EBITDA for GOOGL, while assuming it adds about $75 billion in cash to its balance sheet or returns it shareholders through buybacks. That equates to a fair valuation range between $175-207.
When it comes to technology, there is always the risk of disruption. Itâs a common theme in tech that new upstarts eventually come along and disrupt incumbents. Starting from scratch gives these upstarts a huge advantage, as legacy incumbents are often weighed down by past designs and infrastructure investments that lead to inefficiencies as technologies shift. However, the fact that GOOGL has been built on its own flexible infrastructure helps protect it. The company also pours money into research and development to potentially âdisruptâ itself. We are at the point where this is starting to play out, but GOOGL appears to be well prepared.
GOOGLâs virtual monopoly on search is reason enough to own the stock at current levels. It is one of the largest and most dominant companies in the world. However, the company doesnât sit on its laurels and continually looks at new products, services, and monetization efforts to drive growth.
Longevity can be the biggest question around tech companies as they mature - itâs one reason why Warren Buffett has tended to avoid the sector. However, GOOGL has built a platform focused on simplicity and flexibility, which should allow it to endure and continue to prosper. At the same time, it continually pumps money into R&D to both drive growth and to help future proof itself.
If you look at the number of products, services, and apps GOOGL offers, itâs actually quite staggering. GOOGL products are really ingrained in our everyday lives and often in our work lives as well. And it is GOOGLâs ability to continually innovate that will really drive growth moving forward.
As such, I consider GOOGL a core, long-term holding. I have a âBuyâ rating and $190 price target on the stock.
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