Alphabet reported strong fourth-quarter earningswith sales up 18% to $113 billion and adjusted operating margins down 50 basis points to 31.6%. Google Cloud continues to be the star of the showaccelerating both sequentially and year over year to 48% growth.
GOOG is trading within a range we consider fairly valued.
Price
$306.02
Fair Value
$873.00
Uncertainty
Medium
1-Star Price
$863.00
5-Star Price
$818.00
Economic Moat
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Capital Allocation
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Bulls SayBears Say
Bulls
Alphabet’s core advertising business is deeply entrenched in advertising budgetsallowing the firm to benefit from a secular increase in digital advertising spending
Bears
While Alphabet is seeking to diversify its business away from searchtext-based advertising remains the largest contributor to the firm’s top linecreating a concentration risk.
Alphabet is a holding company that wholly owns internet giant Google. The California-based company derives slightly less than 90% of its revenue from Google servicesthe vast majority of which is advertising sales. Alongside online adsGoogle services houses sales stemming from Google’s subscription services (YouTube TV and YouTube Musicamong others)platforms (sales and in-app purchases on Play Store)and devices (ChromebooksPixel smartphonesand smart home products such as Chromecast). Google’s cloud computing platform accounts for roughly 10% of Alphabet’s revenue. The firm’s investments in up-and-coming technologies such as self-driving cars (Waymo)health (Verily)and internet access (Google Fiber) make up the rest.