The parent company of Google has a "pretty reasonable valuation at 10 times EBITDA," said Cakmak. "I can't say the same about Facebook and Amazon."
In a separate Jan. 3 note, he estimated Alphabet's 2017 EV / EBITDA at 10.9 times, versus 19.2 times for Amazon and 13.5 times for Facebook. EV / EBITDA is the ratio of a company's enterprise value over earnings before interest, tax, depreciation and amortization. The higher the EV/EBITDA number, the more overvalued a company is.
Alphabet's market capitalization as of Tuesday stood at $563.04 billion, according to Thomson Reuters data. For 2017, Cakmak expects the company's earnings per share to come in at $32.63, up from 2016's estimate of $27.78.
From an operational standpoint, significant progress in optimizing search experiences and ads, capturing brand ad dollars through YouTube and Google's prowess in natural language processing underpinned the favorable outlook for Alphabet, Cakmak noted. Alphabet has also made "genuine efforts" in healthcare and education, Cakmak added in his note.
Meanwhile, Cakmak said in his note Amazon was a crowded trade, where the costs associated with content, logistics and competitive pricing pressure to Amazon Web Services were unlikely to have been fully incorporated into expectations. Facebook, on the other hand, was battling increasingly challenging competitors and threats to engagement. It could also potentially invest in photo messaging service Snap.