Alphabet's Negative Cash Flow Raises Red Flags Amid Capital Expenditure Surge
Alphabet Inc., parent company of Google, has undergone significant changes over the past two years. On a recent episode of The Investor's Podcast, hosts Daniel Mahncke and Shawn O'Malley discussed their decreased bullishness on Alphabet stock compared to 18 months ago.
The duo cited Alphabet's first-ever negative free cash flow quarter as a major concern. This was due in part to the company's doubled capital expenditures (capex) and increased long-term debt, which climbed from $46.5 billion to $98.2 billion.
Alphabet's operating margins are expected to compress from 34-35% today to as low as 20% by 2030 if capex estimates of $200 billion this year and up to $300 billion next year hold true.
The company has raised over $50 billion in long-term debt and plans to issue about $85 billion in new shares this year, essentially reversing the stock buybacks that made Alphabet attractive in the past. The suspended buyback yield has also eliminated a key factor in the company's appeal.