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.

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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.

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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.

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