|
Related Topics
|
Category: Stock Market and Alphabet (GOOGL)
Date: 2 August 2020 Stock Price of Alphabet: $1487.95 We take a look at the 2nd quarter 2020 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. Youtube having a bumper of a time with lockdowns being imposed across the world due to Coronavirus. But Alphabet reported a -1.6% decline in revenues and a massive -30% in earnings for the quarter compared to the same quarter of the previous year.
|
We’re working to help people, businesses and communities in these uncertain times - Sundar Pichai, Chief Executive Officer of Google and Alphabet."
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.
Quick facts about Alphabet (GOOGL)
Advertising revenue in 2019
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.
Quick facts about Alphabet (GOOGL)
- Alphabet is listed on the Nasdaq under share code ticker: GOOGL
- Alphabet market capital: $957.3 billion (as at 12 June 2020)
- Revenues in 2019: $161.857 billion
- Earnings per share in 2019: $49.16
- Shares in issue: 346.342 million
- Cash on balance sheet: $16.7 billion
- Goodwill : $17.888 billion (Goodwill is an indication of the value of brand names etc)
- Stockholders equity per share: $201.422 billion
- Stockholders equity per Alphabet shares: $580
- So Alphabet is trading at 2.4 times its stockholders equity per share
- Average price to book value of firms in the S&P 500 is 3.7
Advertising revenue in 2019
- Google Search & other : $ 98.115 billion.
- YouTube ads: $15.149 billion
- Google Network Members’ properties: $21.547 billion
Overview of Alphabet's 2nd quarter 2020 earnings report
The data below refers to the latest quarter's data unless specified otherwise:
- Revenue: $38.297 billion (down from $38.944 billion for the same quarter of the previous year)
- Revenues decreased by -1.6% over the last 12 months
- Total costs and expenses: $31.914 billion (up from $29.764 billion for the same quarter of the previous year)
- Total costs and expenses increased by 7.2% over the last 12 months
- Some margin squeeze for Alphabet with its costs and expenses growing at about 7% while revenues declined by almost 2%
- Net income: $6.959 billion (down from $9.947 billion for the same quarter of the previous year)
- Diluted earnings per share: $10.13 (down from $14.21 for the same quarter of the previous year)
- Diluted number of shares outstanding: 697.024 million (down from 699.954 million for the same quarter of the previous year)
- Cash and cash equivalents :$17.742billion
- Cash and cash equivalents per share: $25.45
- Cash and cash equivalents makes up 1.7% of the group's market capital
- Cash and cash equivalents makes up 6.4% of the group's total assets
- Accounts receivable: $21.201 billion
- Accounts receivable makes up 7.6% of total assets
- Goodwill of Alphabet: $20.824 billion
- Goodwill per share: $29.10
- Goodwill makes up 2.4% of Alphabet's market capital
- Goodwill makes up 7.5% of Alphabet's total assets
- Stockholders equity in Alphabet: 207.322 billion
- Stockholders equity per share: $294.43
- So Alphabet is trading at 5.05 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at
- For perspective the average price to book value of firms in the S&P 500 is 3.7. Read more about the S&P500 here
- Cash generated from operations: $13.993 billion
- Cash generated from operations per share: $20.07
Alphabet's management commentary on their 2nd quarter 2020 earnings report
MOUNTAIN VIEW, Calif. – July 30, 2020 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended June 30, 2020. “We’re working to help people, businesses and communities in these uncertain times,” said Sundar Pichai, Chief Executive Officer of Google and Alphabet. “As people increasingly turn to online services, our platforms — from Cloud to Google Play to YouTube — are helping our partners provide important services and support their businesses.”
“In the second quarter our total revenues were $38.3B, driven by gradual improvement in our ads business and strong growth in Google Cloud and Other Revenues,” said Ruth Porat, Chief Financial Officer of Alphabet and Google. “We continue to navigate through a difficult global economic environment.”
Stock Repurchase
On July 27, 2020, the Board of Directors of Alphabet authorized the company to repurchase up to an additional $28.0 billion of its Class C capital stock. The repurchases are expected to be executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans.
Stock Repurchase
On July 27, 2020, the Board of Directors of Alphabet authorized the company to repurchase up to an additional $28.0 billion of its Class C capital stock. The repurchases are expected to be executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans.
Alphabet (NASDAQ: GOOGL) stock price history
The image below, obtained from Google 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. 5 years ago the stock of Alphabet was trading around $551 and its currently trading at $1487.95 That is a very strong return of 170% provided to Alphabet stockholders over the past 5 years.
The stock of Alphabet is trading at close to the 52 week high of $1587.05 than it is to its 52 week low of $1008.87 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 of $1587.05 than it is to its 52 week low of $1008.87 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:
- Alphabet (GOOGL)
- Apple (APPL)
- Amazon (AMZN)
Recent coverage of Alphabet (GOOGL)
The extract below covers the latest earnings report of Alphabet as obtained from Investors.com
While Apple (AAPL), Amazon.com (AMZN) and Facebook (FB) reported stellar June-quarter results this week, investors were less impressed with Google earnings. Shares in Google-parent Alphabet (GOOGL) fell on Friday as analysts mulled a rebound in its core digital advertising business. Also, YouTube advertising revenue growth came in light in the Google earnings report, released late Thursday.
Stifel analyst Scott Devitt on Friday downgraded Google stock to hold from buy.
"We are lowering our rating as we view the outlook for a progressive return of advertising spend across several of Google's key verticals as appropriately priced into GOOGL," he said in a report to clients. "While trends in the company's advertising business have improved from challenged Q2 lows, we view a material improvement from this point to be largely dependent on a recovery in the global economy."
Read the full article here
While Apple (AAPL), Amazon.com (AMZN) and Facebook (FB) reported stellar June-quarter results this week, investors were less impressed with Google earnings. Shares in Google-parent Alphabet (GOOGL) fell on Friday as analysts mulled a rebound in its core digital advertising business. Also, YouTube advertising revenue growth came in light in the Google earnings report, released late Thursday.
Stifel analyst Scott Devitt on Friday downgraded Google stock to hold from buy.
"We are lowering our rating as we view the outlook for a progressive return of advertising spend across several of Google's key verticals as appropriately priced into GOOGL," he said in a report to clients. "While trends in the company's advertising business have improved from challenged Q2 lows, we view a material improvement from this point to be largely dependent on a recovery in the global economy."
Read the full article here
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 $1240.20 a Alphabet stock (up slightly from our 1st quarter 2020 earnings report valuation of Alphabet). 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 $1240.20 so we would suggest looking to buy Alphabet at around $1116 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 $1240.20 so we would suggest looking to buy Alphabet at around $1116 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
It is expected that Alphabet's 3rd quarter 2020 fiscal year earnings report will be released towards the end of October 2020