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Category: Stock Market and Alphabet
Date: 2 September 2019 Stock Price: $1190.53 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of Alphabet the parent company of Google.
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About Alphabet
Alphabet Inc. is an American multinational conglomerate headquartered in Mountain View, California. It was created through a corporate restructuring of Google on October 2, 2015, and became the parent company of Google and several former Google subsidiaries. Wikipedia
Financial overview of Alphabet's latest earnings report
The numbers we are interested in (for the quarter):
- Revenue: $38.944 billion (up from $32.657 billion for the same quarter of the previous year)
- Operating income: $9,180 billion (up from $3,045 billion for the same quarter of the previous year)
- Net income: $9,947 ( $3,195)
- Diluted EPS: $14.21 ($4.54)
- Diluted number of shares outstanding: 703.247 million
- Number of employees: 107,646 (89,058 )
- Cash and cash equivalents :$16.587 billion
- Cash and cash equivalents per share: $23.59
- Cash and cash equivalents makes up 1.98% of the group's market capital
- Cash and cash equivalents makes up 8.6% of the group's total assets
- Accounts receivable: $20.965 billion
- Accounts receivable makes up 8.15% of total assets
- Stockholders equity: 192.192 billion
- Stockholders equity per share: $273.39
- Cash generated from operations: $ 9.947 billion
- Cash generated from operations per share: $14.15
Alphabet's management commentary on the results and earnings guidance
MOUNTAIN VIEW, Calif. – July 25, 2019 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended June 30, 2019. “Our effort to build a more helpful Google for everyone brings countless opportunities to help users, partners, and enterprise customers every day,” said Sundar Pichai, Chief Executive Officer of Google. “From improvements in core information products such as Search, Maps, and the Google Assistant, to new breakthroughs in AI and our growing Cloud and Hardware offerings, I’m incredibly excited by the momentum across Google’s businesses and the innovation that is fueling our growth.”
"With revenues of $38.9 billion, up 19% versus the second quarter of 2018 and up 22% on a constant currency basis, we’re delivering strong growth," said Ruth Porat, Chief Financial Officer of Alphabet and Google. "Our ongoing investments in compute capabilities and engineering talent reflect the compelling opportunities we see across the company."
Stock Repurchase
On July 24, 2019, the Board of Directors of Alphabet authorized the company to repurchase up to an additional $25.0 billion of its Class C capital stock. The repurchase is 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.
"With revenues of $38.9 billion, up 19% versus the second quarter of 2018 and up 22% on a constant currency basis, we’re delivering strong growth," said Ruth Porat, Chief Financial Officer of Alphabet and Google. "Our ongoing investments in compute capabilities and engineering talent reflect the compelling opportunities we see across the company."
Stock Repurchase
On July 24, 2019, the Board of Directors of Alphabet authorized the company to repurchase up to an additional $25.0 billion of its Class C capital stock. The repurchase is 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 good old time for Alphabet stock holders over the last 5 years, with the stock trading around the $600 a share 5 years ago, and trading at almost double that right now, 5 years later. While the stock is quiet some distance away from its 52 week high, it is even further away from its 52 week low, which indicates in recent weeks its trading momentum has been large upwards.
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 we value the stock at $1225.10 a share. So it is trading close to our target price (full value price) for Alphabet.
We therefore don't recommend that fundamental long term investors buy into Alphabet at its current price. We would recommend looking to enter Alphabet at a price about 10% below our target price, so we would suggest getting in at around $1100.00 a share for long term investors looking for value.
We therefore don't recommend that fundamental long term investors buy into Alphabet at its current price. We would recommend looking to enter Alphabet at a price about 10% below our target price, so we would suggest getting in at around $1100.00 a share for long term investors looking for value.