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Category: Stock Market and Alphabet
Date: 4 February 2020 Stock Price: $1482.60 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Alphabet the parent company of Google the world's best known search engine and Youtube, the world's biggest video streaming service.
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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
Overview of Alphabet's 4th quarter 2019 earnings report
The data below refers to the latest quarter's data unless specified otherwise:
- Revenue: $46.075 billion (up from $39.276 billion for the same quarter of the previous year)
- Revenues increased by 17.3% over the last 12 months
- Total costs and expenses: $36.809 billion (up from $31.055 billion for the same quarter of the previous year)
- Total costs and expenses increased by 18.5% over the last 12 months
- Some margin squeeze being experienced by Alphabet with its costs and expenses growing at a rate faster than their revenues
- Net income: $10.671 billion (up from $8.948 billion for the same quarter of the previous year)
- Diluted earnings per share: $12.87 (down from $15.35 for the same quarter of the previous year)
- Diluted number of shares outstanding: 695.194 million (down from 700.899 million for the same quarter of the previous year)
- Cash and cash equivalents :$18.498 billion
- Cash and cash equivalents per share: $26.60
- Cash and cash equivalents makes up 1.79% of the group's market capital
- Cash and cash equivalents makes up 6.7% of the group's total assets
- Accounts receivable: $25.326 billion
- Accounts receivable makes up 9.17% of total assets
- Goodwill of Alphabet: $20.624 billion
- Goodwill per share: $29.66
- Goodwill makes up 2% of Alphabet's market capital
- Goodwill makes up 7.47% of Alphabet's total assets
- Stockholders equity in Alphabet: 201.442 billion
- Stockholders equity per share: $289.76
- So Alphabet is trading at 5.11 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
- Cash generated from operations: $14.427 billion
- Cash generated from operations per share: $20.75
Alphabet's management commentary on their 4th quarter 2019 earnings
MOUNTAIN VIEW, Calif. – February 3, 2020 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter and fiscal year ended December 31, 2019. “Our investments in deep computer science, including artificial intelligence, ambient computing and cloud computing, provide a strong base for continued growth and new opportunities across Alphabet,” said Sundar Pichai, Chief Executive Officer of Alphabet and Google.
“I’m really pleased with our continued progress in Search and in building two of our newer growth areas — YouTube, already at $15 billion in annual ad revenue, and Cloud, which is now on a $10 billion revenue run rate."
“I’m really pleased with our continued progress in Search and in building two of our newer growth areas — YouTube, already at $15 billion in annual ad revenue, and Cloud, which is now on a $10 billion revenue run rate."
“In 2019 we again delivered strong revenue growth, with revenues of $162 billion, up 18% year over year and up 20% on a constant currency basis,” said Ruth Porat, Chief Financial Officer of Alphabet and Google. “To provide further insight into our business and the opportunities ahead, we’re now disclosing our revenue on a more granular basis, including for Search, YouTube ads and Cloud.”
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, with the stock trading around $534, five years ago and its currently trading at $1482.60. That is a very strong return of 177.64% provided to Alphabet stockholders over the past 5 years.
The stock of Alphabet is trading at a lot closer to its 52 week high of $1500.58 than it is to its 52 week low of $1027.03 which to us is a clear indication that the sentiment and momentum of Alphabet's stock is very positive at this point in time.
The stock of Alphabet is trading at a lot closer to its 52 week high of $1500.58 than it is to its 52 week low of $1027.03 which to us is a clear indication that the sentiment and momentum of Alphabet's stock is very positive at this point in time.
Recent coverage of Alphabet
The extract below covers the latest earnings report of Alphabet as obtained from TheStreet.com
Alphabet Inc. (GOOGL) - Get Report shares slipped lower in pre-market trading Tuesday after the Google parent unveiled a detailed fourth quarter earnings report that shed new light on its myriad business, but indicated mixed results from some of its key properties. Google said earnings for the three months ending in December rose 20.2% from last year to $15.35 per share, well ahead of Street forecasts, but posted overall revenues of $46.08 billion, a 17.3% growth that missed analysts' estimates. Google also provided detail on two of its key business units -- YouTube and Cloud -- for the first time, with both showing solid, but perhaps not spectacular, revenue growth rates that caught investors off-guard.
YouTube revenues were pegged at $4.717 billion and $15.1 billion for the year, compared to a thumbnail forecast of $25 billion, while Cloud services sales grew 53% from last year to $2.614 billion, trailing that of rival Microsoft's (MSFT) Azure platform. Search revenues which rose 17% to $27.2 billion, also trailed growth rates at Facebook (FB) and Amazon (AMZN)
Read the full article here
Alphabet Inc. (GOOGL) - Get Report shares slipped lower in pre-market trading Tuesday after the Google parent unveiled a detailed fourth quarter earnings report that shed new light on its myriad business, but indicated mixed results from some of its key properties. Google said earnings for the three months ending in December rose 20.2% from last year to $15.35 per share, well ahead of Street forecasts, but posted overall revenues of $46.08 billion, a 17.3% growth that missed analysts' estimates. Google also provided detail on two of its key business units -- YouTube and Cloud -- for the first time, with both showing solid, but perhaps not spectacular, revenue growth rates that caught investors off-guard.
YouTube revenues were pegged at $4.717 billion and $15.1 billion for the year, compared to a thumbnail forecast of $25 billion, while Cloud services sales grew 53% from last year to $2.614 billion, trailing that of rival Microsoft's (MSFT) Azure platform. Search revenues which rose 17% to $27.2 billion, also trailed growth rates at Facebook (FB) and Amazon (AMZN)
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 (full value) price at $1169.80 a Alphabet stock (down slightly from our 3rd quarter 2019 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 $1169.80, so we would suggest looking to buy Alphabet at around $1052 a stock.
Since the stock of Alphabet is trading at well above our suggested entry point into the stock we 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 $1169.80, so we would suggest looking to buy Alphabet at around $1052 a stock.
Since the stock of Alphabet is trading at well above our suggested entry point into the stock we rate the stock of Alphabet as a sell
Next earnings release of Alphabet
It is expected that Alphabet's 1st quarter 2020 fiscal year earnings report will be released in early May 2020