It’s time to breakdown one of the FAANG stocks. Here is the breakdown on $GOOGL, otherwise known as Alphabet.
Current Price: $1,752.64
52/Wk High: $1,843.83
52/Wk Low: $1,008.87
Market Cap: $607.4 Billion
Read below for the breakdown!
Alphabet ($GOOGL) is a major software and IT services company with a vast array of internet products including Google, Nest, Waymo, and YouTube.
When breaking down Alphabet’s segments the company’s Google segment includes Google Maps, Chrome, Google Cloud, Android, YouTube, and most importantly Ads.
Given the sheer size of Alphabet’s digit footprint, COVID-19 has created both positives and negatives for the company’s earnings.
In recent news, Google has been hit with several antitrust lawsuits, making the argument that Google illegally held and maintained a monopoly.
While these lawsuits may present a short term risk, historically most antitrust lawsuits on the likes of major company’s have minimal long term effects.
Shifting into the numbers, Alphabet delivered a Q3 beat with an EPS of $16.40, much better than the expected EPS consensus estimate of $11.29. On a year over year basis, the Q3 EPS is up 62.06% since Q3 2019.
Alphabet went on to report Q3 2020 revenues of $46.173 billion, representing 14% growth year over year. On the downside, revenues grew 20%, a much higher growth rate than in 2020.
Furthermore, operating income totaled $11.213 billion, much better than the Q3 2019 operating income level of $9.177 billion. Operating margin also improved by 1% year over year to 24%.
Management also reported a significant improvement in net income, with net income totaling $11.247 billion, much higher than the 2019 Q3 level of $7.068 billion.
Analyzing revenues by segment the google search and others segment turned out a whopping $26.338 billion in revenues, a big improvement over the 2019 level of $24.741 billion.
The YouTube ads segment also saw significant revenue growth, increasing to $5.037 billion, much better than the 2019 same time level of $3.804 billion.
Rounding out the Google segment, Google reported an operating income of $12.589 billion for Q3 2020, much better than the 2019 same time level of $10.746 billion.
Management was upbeat about the quarter.
“We had a strong quarter, consistent with the broader online environment,” CEO Sundar Pichai said.
Taking a look at the balance sheet the numbers are solid.
Total Debt: $15.023 Billion
Total Liabilities: $48.200 Billion
Total Assets: $299.243 Billion
Cash & Short Term Inv: $132.596 Billion
When it comes to valuation, the numbers are not bad in comparison to other FAANG stocks.
Price to Earnings: 33.87x
Price to Sales: 6.90x
Price to Book: 5.58x
Price to Cash Flow: 20.07x
Management has also done a solid job, with leadership turning the corner.
Return on Equity: 17.51%
Return on Assets: 12.70%
Return on Invested Capital: 15.04%
Given the numbers, the analysts are bullish with the mean price target sitting at $1,944/share, representing a 10.92% upside.
It is also important to note that the high price target is $2,250/share, representing a 28.38% gain, while the low price target is $1,700/share, representing a -3.00% downside.
The big money is quite involved as well with 78.03% of Alphabet being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and Fidelity Management & Research.
When it comes to technicals $GOOGL has been mostly flat in recent months. According to the six-month charts the MACD is trending with downward momentum around 6.59.
The six-month charts are also indicating an RSI of 51.36 and CCI of -39.5043, both of which are on the lower end.
In short, Alphabet is a classic FAANG stock with solid long-term potential given the digitization trends of not only the United States but the world.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.