$GOOGL: Cloud revenue doubled. Free cash flow went negative. Here's my sell put line.
Where the stock sits
• Wednesday close $293.45 (+2.11%)
• 52-week range $270.70–408.61. Now 28.2% below the high.
• Down 16.6% in a month and 6.1% this year
• On Oct 29, the day after Q3 results, it fell 12.6% to $283.82, its worst day as a public company
What Q3 said
The strong part:
• Revenue $127.6B, up 25%, its 13th straight quarter of double-digit growth
• Google Cloud $30.7B, up 103%, driven by AI infrastructure, AI solutions and sales of its own TPU systems
The weak part:
• Search $63.35B, up 12%, against $64.96B expected. Growth slowed from 17% in Q2.
• EPS $2.12 against $3.01 expected. Most of the miss was an unrealized loss on its SpaceX stake.
• Q3 capex $51.4B, against $42.3B of operating cash flow. That's free cash flow of −$9.1B, the second negative quarter in a row.
• 2026 capex guidance kept at $195–205B, and management says 2027 will "increase significantly"
Read the numbers right
1. The TTM P/E of 15 looks cheap, but it's flattered. TTM net income ($235.9B) is bigger than operating income ($157.0B) because investment gains are in there. The cleaner number is the forward P/E of 19.1.
2. Operating cash flow over the last 12 months was $179.6B, but free cash flow was only $19.7B. About $160B went into capex, so the free cash flow yield is just 0.56%.
3. The balance sheet is not the problem: $265.1B in cash and short-term investments against $126.1B of debt. ROIC is 37.9%.
My read: the business is fine; the cash flow hasn't come back yet. Until Cloud margins show the spending pays, the stock trades on fear of capex.
Checking it against my rules
❌ Trend: $293.45 against a 200-day around $339, 13.5% below
✅ Earnings: next report Feb 2, 2027, after the Dec 18 expiry
⚠️ Volatility: 30-day IV about 36% with an IV rank of about 70, but the stock has actually been moving at about 44.5% (30-day HV). IV/HV is about 0.8, so the premium doesn't pay enough for the swings.
The strike math (Dec 18, 36 days)
• 1 standard deviation down ≈ $260. There's no moving average below the price to use as a second anchor.
• $260 has delta 0.12, too far out to be worth selling
• $265 has delta 0.16, model premium ≈ $2.50–3.40, break-even ≈ $262
• $265 is 9.7% below Wednesday's close and below the $270.70 52-week low
My call: $265 is my line, and it's not a trade yet.
I sell it when either:
1. GOOGL closes back above its 200-day, or
2. Q4 results (Feb 2) show free cash flow turning positive
Then: Tier 2 size (2% max, $26,500 cash per contract), stop at 2.5× the credit, take profit at 50%. Ex-dividend is Dec 7, but the dividend is too small (0.30% yield) to change the put math.
The verdict: great business, broken chart. $265 sits below the 52-week low, and that's where I'd be happy to own it once the trend repairs.
Personal framework, education only, not advice. Premiums are Black-Scholes estimates, not live quotes. Options carry risk, including assignment.
#GOOGL #Alphabet #GoogleCloud #SellPut #Options
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