Expert: YouTube Could Be Worth $40 Billion If Spun Off Google

Google Inc GOOG GOOGL is reportedly struggling to turn YouTube, the massively successful online video site, into a profitable entity. According to The Wall Street Journal, YouTube's revenue came to $4 billion in 2014 -- a $1 billion increase from 2013. Despite the gain, YouTube spends so much on content and equipment that it still couldn't turn a profit. Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, had some doubts about that story. "To this day, there's no way it doesn't stand up as one of the most brilliant acquisitions ever done," Udall told Benzinga. "I was a Google owner back when they bought YouTube. The minute I saw it, I thought, 'If they actually pull off the deal, it'll be the deal of the century.'" To put things into perspective, Udall said that if YouTube were to spinout of Google and become a separate company, it could be worth $30 to $40 billion. He estimated that it would trade at 6x to 8x annual sales "with a pretty decent growth rate." "If you think about it, [YouTube was] a $1.6 billion [acquisition]," said Udall. "Now they have an asset worth $40 billion."

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Core Franchise

Udall said that, in addition to YouTube's success as a video platform, it also helped Google's core franchise. "A lot of searches get redirected to it," he said. "A lot of stuff bounces back and forth. Gchat never took off at all, but a lot of people share opinions and commentary on YouTube. It really kind of kick-started that whole industry. Bottom line, I think it's a huge home run."

'Shining Stars'

Udall said that a "brilliant masterstroke" would be to spin out YouTube as a standalone entity. "[YouTube] is one of the shining stars of Google," he said. "I've kind of cooled my jets on Google now. I'm kind of a trader on it. But that is definitely one of the [best] assets." Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.