Alphabet (GOOGL) earnings release review for the 4th quarter of their 2021 fiscal year
Category: Stock Market and Alphabet (GOOGL)
Date: 2 February 2022 Stock Price of Alphabet: $2752.88 Market Capital of Alphabet: $1.83 trillion We take a look at the 4th quarter 2021 earnings report of Alphabet the parent company of Google the world's best known search engine and Youtube, the world's biggest video streaming service. For the quarter the group reported revenues of $75.32 billion and net income of $20.64 billion.
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Sundar Pichai, CEO of Alphabet and Google, said: “Our deep investment in AI technologies continues to drive extraordinary and helpful experiences for people and businesses, across our most important products"
About Alphabet
Alphabet is a collection of businesses — the largest of which is Google. We report all non-Google businesses collectively as Other Bets. Our Other Bets include earlier stage technologies that are further afield from our core Google business. We take a long term view and manage the portfolio of Other Bets with the discipline and rigor needed to deliver long-term returns. Each of our businesses are designed to prosper through strong leaders and independence.
Google’s core products and platforms, such as Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube each have over one billion monthly active users. As the majority of Alphabet’s big bets continue to reside within Google, an important benefit of the shift to Alphabet has been the tremendous focus that we’re able to have on Google’s many extraordinary opportunities.
Google’s core products and platforms, such as Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube each have over one billion monthly active users. As the majority of Alphabet’s big bets continue to reside within Google, an important benefit of the shift to Alphabet has been the tremendous focus that we’re able to have on Google’s many extraordinary opportunities.
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Overview of Alphabet's 4th quarter 2021 earnings
All figures in $million (excl margins and EPS) 4th quarter 2020 4th quarter 2021
- Revenues $56.898 $75.325
- Increase in revenues year over year 23% 32 %
- Operating income $15.651 $ 21,885
- Operating margin 28% 29%
- Other income (expense), net $ 3,038 $ 2,517
- Net income $ 15,227 $20,42
- Diluted EPS $22.30 $30.69
Alphabet's management commentary on their 4th quarter 2021 earnings
MOUNTAIN VIEW, Calif. – February 1, 2022 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter and fiscal year ended December 31, 2021. Sundar Pichai, CEO of Alphabet and Google, said: “Our deep investment in AI technologies continues to drive extraordinary and helpful experiences for people and businesses, across our most important products. Q4 saw ongoing strong growth in our advertising business, which helped millions of businesses thrive and find new customers, a quarterly sales record for our Pixel phones despite supply constraints, and our Cloud business continuing to grow strongly.” Ruth Porat, CFO of Alphabet and Google, said: “Our fourth quarter revenues of $75 billion, up 32% year over year, reflected broad-based strength in advertiser spend and strong consumer online activity, as well as substantial ongoing revenue growth from Google Cloud. Our investments have helped us drive this growth by delivering the services that people, our partners and businesses need, and we continue to invest in long-term opportunities.”
Change in the useful lives of our server and network equipment (unaudited) In January 2021, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years. This change in accounting estimate was effective beginning in fiscal year 2021, and the effect for the three and twelve months ended December 31, 2021, respectively, was a reduction in depreciation expense of $446 million and $2.6 billion and an increase in net income of $347 million and $2.0 billion, or $0.52 and $3.02 per basic share and $0.52 and $2.98 per diluted share.
Stock Split Effected in Form of Stock Dividend (“Stock Split”) Alphabet today announced that the Board of Directors had approved and declared a 20-for-one stock split (the “Stock Split”) in the form of a one-time special stock dividend on each share of the Company’s Class A, Class B, and Class C stock. The Stock Split is subject to stockholder approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Class A, Class B, and Class C stock to accommodate the Stock Split. If approval is obtained, each of the Company’s stockholders of record at the close of business on July 1, 2022 (the “Record Date”), will receive, after the close of business on July 15, 2022, a dividend of 19 additional shares of the same class of stock for every share held by such stockholder as of the Record Date.
Change in the useful lives of our server and network equipment (unaudited) In January 2021, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years. This change in accounting estimate was effective beginning in fiscal year 2021, and the effect for the three and twelve months ended December 31, 2021, respectively, was a reduction in depreciation expense of $446 million and $2.6 billion and an increase in net income of $347 million and $2.0 billion, or $0.52 and $3.02 per basic share and $0.52 and $2.98 per diluted share.
Stock Split Effected in Form of Stock Dividend (“Stock Split”) Alphabet today announced that the Board of Directors had approved and declared a 20-for-one stock split (the “Stock Split”) in the form of a one-time special stock dividend on each share of the Company’s Class A, Class B, and Class C stock. The Stock Split is subject to stockholder approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Class A, Class B, and Class C stock to accommodate the Stock Split. If approval is obtained, each of the Company’s stockholders of record at the close of business on July 1, 2022 (the “Record Date”), will receive, after the close of business on July 15, 2022, a dividend of 19 additional shares of the same class of stock for every share held by such stockholder as of the Record Date.
Alphabet (GOOGL) stock price chart over the last 5 years
The image below shows the stock price history of Alphabet over the last 5 years. And its been a very good time for Alphabet stock holders over the last 5 years. Over the last 5 years the stock of Alphabet has returned 224%. A return no investor would say no to.
The stock of Alphabet is trading at close to the 52 week high than it is to its 52 week low which to us shows that the sentiment and momentum of GOOGL stock price is very positive at this point in time.
The stock of Alphabet is trading at close to the 52 week high than it is to its 52 week low which to us shows that the sentiment and momentum of GOOGL stock price is very positive at this point in time.
Alphabet (GOOGL) stock vs Amazon (AMZN) stock Apple (APPL) stock over the last 5 years
The image below shows the stock price performance of three of the NASDAQ tech heavy weights, Alphabet (GOOGL), Apple (APPL) and Amazon (AMZN) over the last 5 years. And looking at the graphic one can see the tremendous surge in the stock prices of all three of these stocks over the last 5 years. The summary below shows the stock price returns of the three stocks over the last 5 years:
- Apple (APPL): 410%
- Amazon (AMZN): 257%
- Alphabet (GOOGL): 224%
Alphabet (NASDAQ: GOOGL) latest stock valuation
So what do we value Alphabet at based on their latest earnings report, their earnings per share, cash generated from their operations and the group's future prospects. Based on Alphabet's latest earnings report our valuation model provides a target price (full value price) at $2324 a Alphabet stock. We therefore believe the stock of Alphabet is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at at least 10% below our target price, which in this case is $2324 so we would suggest looking to buy Alphabet at around $2089 a stock.
Since the stock of Alphabet (GOOGL) is trading at well above our suggested entry point into the stock we will go against popular market and pundits opinions and rate the stock of Alphabet as a sell
We usually recommend that long term fundamental or value investors look to enter a stock at at least 10% below our target price, which in this case is $2324 so we would suggest looking to buy Alphabet at around $2089 a stock.
Since the stock of Alphabet (GOOGL) is trading at well above our suggested entry point into the stock we will go against popular market and pundits opinions and rate the stock of Alphabet as a sell
Next earnings release of Alphabet (GOOGL)
It is expected that Alphabet's 1st quarter 2022 fiscal year earnings report will be released towards the end of April 2022