Is Alphabet (Google) Stock Attractive At Current Levels?

GOOG: Alphabet logo

Alphabet (Google)’s stock (NASDAQ: GOOG) has lost approximately 22% YTD as compared to the 15% drop in the S&P500 index over the same period. Notably, the benchmark index for the technology sector, the NASDAQ-100 Technology Sector index, has lost 30% YTD. That said, at its current price of $2235, the stock has a potential upside potential of 38% to its fair value of $3095 – Trefis’ estimate for Google’s valuation

The global technology giant posted mixed results in the first quarter of 2022, with earnings missing the consensus estimates but revenues being in-line. It reported total revenues of $68 billion – up 23% y-o-y, primarily driven by a 22% increase in the Google advertising revenues to $54.7 billion. Notably, the Google advertising includes Google search, YouTube ads, and Google network.  The segment witnessed growth on each of the four metrics: – paid clicks (up 16% y-o-y), cost-per-click (up 8%), impressions (up 5%), and cost-per-impression (up 17%). Further, the Google cloud revenues also jumped 44% y-o-y. While the cost of revenues and operating expenses did increase on an absolute basis, the operating margin remained around the same level as the year-ago figure of 30%. On the flip side, the net income decreased 8% y-o-y to $16.4 billion, mainly because of a significant drop in “other income” from $4.85 billion to -$1.16 billion. Markedly, the “other income” includes net gains and losses for marketable and non-marketable equity securities. 

The company’s top-line increased 41% y-o-y to $257.6 billion in FY 2021. It was mainly driven by a 43% growth in the Google advertising revenues, followed by a 47% rise in the Google cloud business. All in all, it translated into an 89% jump in the net income to $76 billion. The jump was primarily due to lower expenses as a % of revenues and higher “other income.”

Relevant Articles
  1. What To Expect From Alphabet Stock ?
  2. Alphabet Stock Lost 10% In One Week, What’s Next?
  3. What’s Happening With Digital Ad Stocks?
  4. Alphabet (Google) Stock Underperformed The Consensus In Q3, What’s Next?
  5. Alphabet (Google) Stock Missed The Street Expectations In Q2, What’s Next?
  6. Alphabet (Google) Stock Lost 6.2% In One Week, What To Expect?

Moving forward, Google’s revenues are forecast to touch $294.9 billion in FY2022. Further, its net income margin is likely to slightly decrease in the year, leading to a 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 track our view over time.

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

 Returns Jun 2022
MTD [1]
YTD [1]
Total [2]
 GOOG Return -1% -22% 191%
 S&P 500 Return -2% -15% 80%
 Trefis Multi-Strategy Portfolio 0% -20% 216%

[1] Month-to-date and year-to-date as of 6/10/2022
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates