Are Alphabet (Google) Stocks Attractive at Current Levels?

Alphabet’s stock (Google) (NASDAQ
NDAQ

NDAQ
: GOOG) is down about 22% year-to-date, compared to a 15% drop in the S&P500 over the same period. Notably, the benchmark for the technology sector, the NASDAQ-100 Technology Sector Index, has lost 30% since the start of the year. That said, at its current price of $2235, the stock has a potential upside potential of 38% at its fair value of $3095 – Trefis’ estimate for Google’s rating.

Advertising

The global tech giant posted mixed results in the first quarter of 2022, with earnings below consensus estimates but revenue in line. It reported total revenue of $68 billion, up 23% year-on-year, mostly due to a 22% increase in Google.
GOOG
ad revenue at $54.7 billion. Notably, Google advertising includes Google search, YouTube ads, and the Google Network. The segment saw growth on each of four metrics: – paid clicks (+16% YoY), cost per click (+8%), impressions (+5%) and cost per impression (+17%). %). Additionally, Google’s cloud revenue also jumped 44% year-over-year. While the cost of revenues and operating expenses increased on an absolute basis, the operating margin remained at about the same level as the 30% figure of the previous year. On the other hand, net income was down 8% year-on-year to $16.4 billion, mainly due to a significant drop in “other income” from $4.85 billion to -$1.16 billion. Notably, “other income” includes net gains and losses for marketable and non-marketable equity securities.

ADVERTISING

The company’s revenue grew 41% year-on-year to $257.6 billion in fiscal 2021. It was primarily driven by a 43% growth in Google advertising revenue, followed by of a 47% increase in Google’s cloud business. Overall, that translated into an 89% jump in net profit to $76 billion. This jump is mainly attributable to the decrease in expenses as a % of income and the increase in “other income”.

To advance Google revenue is expected to reach $294.9 billion in fiscal 2022. Additionally, its net profit margin is expected to decline slightly in the fiscal year, resulting in net income of $70 billion. This, coupled with an annual EPS of $106.68 and a P/E multiple of 29x, will lead to the valuation of $3095.

Here you’ll find our previous coverage of Google stock, where you can follow our view over time.

ADVERTISING

With stock prices plummeting across all sectors, we could be heading into a bear market for the first time since March 2020, when the Covid-19 outbreak triggered a stock market crash. We capture key Dow trends during and after major market crashes in our interactive dashboard analysis,’Comparison of stock market crashes.’

What if you were looking for a more balanced portfolio instead? Our high quality wallet and multi-strategy portfolio have beaten the market consistently since the end of 2016.

ADVERTISING

Invest with Trefis Portfolios that beat the market

See everything Trefis Price estimates