Earnings Beat Already Priced In For Google’s Stock?

by Trefis Team
Alphabet Inc.
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Alphabet (Google) (NASDAQ: GOOG) is scheduled to report its fiscal Q1 2021 results on Tuesday, April 27. We expect GOOG to beat the consensus estimates for revenues and earnings. The company has reported better than expected revenues and earnings figures in each of the last three quarters. In the past year the company’s cloud segment led revenue growth as multiple organizations shifted to work-from-home and digitization. We expect the same to drive the first-quarter FY2021 results, as well.

Our forecast indicates that Google’s valuation is around $2160 per share, which is around 6% below the current market price of around $2268. Look at our interactive dashboard analysis on Google’s pre-earnings: What To Expect in Q1? for more details. 

(1) Revenues expected to be ahead of consensus estimates in Q1

Trefis estimates GOOG’s fiscal Q1 2021 revenues to be around $54.4 billion, 6% above the $51.3 billion consensus estimate. GOOG’s revenues of $182.5 billion for the full year 2020 were above its 2019 figure, as the cloud segment led the revenues growth. The other segments saw recovery in growth in the last two quarters. We expect the momentum generated over last couple of quarters to continue in the first quarter of FY2021. Overall, we expect revenue of around $221.6 billion in FY2021. Our dashboard on Google’s revenues offers more details on the company’s segments.

(2) EPS likely to beat the consensus estimates

GOOG’s Q1 2021 earnings per share (EPS) is expected to be $17.44 per Trefis analysis, above the consensus estimate of $15.90. The company’s net income margin rose slightly. This increased the EPS figure from $49.06 in 2019 to $58.61 in 2020. The removal of lockdowns and steady growth in the rate of vaccination has contributed to a revival in demand across sectors. Altogether, the company is likely to report an EPS of around $66.89 in FY2021.

(3) Stock price estimate 5.8% below the current market price

Going by our Google’s valuation, with an EPS estimate of around $66.89 and a P/E multiple of 32.3x in fiscal 2021, translates into a price of $2160, which is 5.8% below the current market price of around $2268.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

Looking for reasonably valued software stocks with big room to grow? Check out our theme on Mid-Cap SaaS Stocks.


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