Alphabet (GOOGL) earnings release review for the 3rd quarter of their 2021 fiscal year
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Category: Stock Market and Alphabet (GOOGL)
Date: 2 August 2020 Stock Price of Alphabet: $2786.17 Market Capital of Alphabet: $1.86 trillion We take a look at the 3rd 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 $65.1 billion and net income of $18.9 billion.
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Sundar Pichai, CEO of Alphabet and Google -Five years ago, I laid out our vision to become an AI-first company. This quarter’s results show how our investments there are enabling us to build more helpful products for people and our partners."
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.
Google London Office. Image obtained from Fortune.com
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Overview of Alphabet's 3rd quarter 2021 earnings
3rd quarter 2020 3rd quarter 2021
- Revenues $ 46,173 $ 65,118
- Increase in revenues year over year 14 % 41 %
- Increase in constant currency revenues year over year 15 % 39 %
- Operating income $ 11,213 $ 21,031
- Operating margin 24 % 32 %
- Other income (expense), net $ 2,146 $ 2,033
- Net income $ 11,247 $ 18,936
- Diluted EPS $ 16.40 $ 27.99
Alphabet's management commentary on their 3rd quarter 2021 earnings
MOUNTAIN VIEW, Calif. – October 26, 2021 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended September 30, 2021. Sundar Pichai, CEO of Alphabet and Google, said: “Five years ago, I laid out our vision to become an AI-first company. This quarter’s results show how our investments there are enabling us to build more helpful products for people and our partners. Ongoing improvements to Search, and the new Pixel 6, are great examples. And as the digital transformation and shift to hybrid work continue, our Cloud services are helping organizations collaborate and stay secure.” Ruth Porat, CFO of Alphabet and Google, said: “Our consistent investments to support long-term growth are reflected in strong financial performance, with revenues of $65.1 billion in the quarter. We continued to deliver across our business by providing helpful and valuable experiences for both consumers and our partners.”
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 nine months ended September 30, 2021, respectively, was a reduction in depreciation expense of $591 million and $2.1 billion and an increase in net income of $460 million and $1.7 billion, or $0.69 and $2.50 per basic share and $0.68 and $2.46 per diluted share
Share Repurchases (unaudited) During the three months ended September 30, 2021, we repurchased and subsequently retired 4.6 million aggregate shares for $12.6 billion, consisting of 0.5 million shares or $1.5 billion of Class A stock and 4.1 million shares or $11.1 billion of Class C stock.
Share Repurchases (unaudited) During the three months ended September 30, 2021, we repurchased and subsequently retired 4.6 million aggregate shares for $12.6 billion, consisting of 0.5 million shares or $1.5 billion of Class A stock and 4.1 million shares or $11.1 billion of Class C stock.
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 254.9%. 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 (NASDAQ: GOOGL) share price history over the last 5 years
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): 434%
- Amazon (AMZN): 329%
- Alphabet (GOOGL): 254.9%
Alphabet (GOOGL) stock vs Amazon (AMZN) stock Apple (APPL) stock over the last 5 years
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 $2320 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 $2320 so we would suggest looking to buy Alphabet at around $2088 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 $2320 so we would suggest looking to buy Alphabet at around $2088 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 4th quarter 2021 fiscal year earnings report will be released towards the end of January 2021