Tech titan Alphabet Inc. (GOOGL) is gearing up to release its fiscal 2024 first-quarter earnings report on April 25, 2024. This article explains why the stock deserves a spot in your portfolio.
Given its status as one of the industry leaders in the tech space, analysts are projecting a 12.8% year-over-year increase in GOOGL’s revenue, expected to reach $78.70 billion. Moreover, they predict a 28.6% uptick in EPS compared to the previous-year quarter, with estimates set at $1.50.
Remarkably, the company has consistently surpassed consensus revenue and EPS estimates over the past four quarters. This quarter, attention is being paid to the growth of Google Search and YouTube ad revenue while Google Cloud continues to drive significant expansion with its growing portfolio of cloud services.
Additionally, the company is leveraging investments in generative AI, expanding its presence in cloud computing, improving search results, experiencing robust adoption of Android, and deepening its focus on wearables.
The stock has shown impressive gains, rising by 50.2% over the past year and 13.9% year-to-date, closing its last trading session at $159.13. Currently, it exceeds both its 50-day and 200-day moving averages, indicating a bullish trend.
Decoding GOOGL's potential:
New Investments
On April 23, GOOGL announced a €600 million ($641.71 million) investment in a new data center in Groningen, Netherlands, creating 125 jobs. This adds to the company's total investment in Dutch data infrastructure, which has exceeded €3.80 billion ($4.06 billion) since 2014.
Robust Financials
During the fourth quarter, which ended December 31, 2023, GOOGL saw robust growth, with revenues rising 13.5% year-over-year to $86.31 billion. Income from operations surged by 30.5% from the year-ago quarter to $23.70 billion, while net income soared to $20.69 billion, marking a 51.8% increase from the prior year’s quarter. EPS for Class A, B, and C stock reached $1.64, up 56.2% year-over-year.
Key Metrics Over The Years
Over the past three years, GOOGL’s revenue and EBITDA increased at CAGRs of 19% and 22.2%, respectively. Its net income and EPS grew at respective CAGRs of 22.4% and 25.6% over the same time frame. In addition, the company’s levered free cash flow rose at a CAGR of 17.8% during the period.
Rosy Annual Forecasts
The consensus revenue estimate for fiscal year 2024 is $342.53 billion, signaling an 11.4% year-over-year upturn. Similarly, the consensus EPS estimate for the current year is $6.79, reflecting a 17.2% increase from the previous year.
Looking ahead, analysts forecast a 10.5% and 15.2% year-over-year growth in GOOGL's revenue and EPS for fiscal year 2025, projecting figures of $378.54 billion and $7.83, respectively.
Robust Profitability
GOOGL’s trailing-12-month EBIT margin of 28.70% is 256% higher than the 8.06% industry average. The stock’s trailing-12-month net income margin of 24.01% is 830.1% higher than the 3.53% industry average. Further, its trailing-12-month LFCF margin of 19.08% is 124.7% higher than the industry average of 8.49%.
POWR Ratings Exhibit Solid Prospects
GOOGL’s solid outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories.
GOOGL boasts an A-grade for Sentiment, mirroring upbeat analyst forecasts. Additionally, it earns a B for Quality, reflecting its superior profitability metrics compared to industry standards.
The stock is ranked #12 out of 53 stocks in the B-rated Internet industry.
Click here to access GOOGL’s Growth, Value, Momentum, and Stability ratings.
Bottom Line
GOOGL’s earnings projections suggest a promising outlook for GOOGL's financial performance in the to-be-reported quarter, reflecting the company's continued ability to generate robust revenue and improve profitability. Moreover, this anticipated growth reflects the market's confidence in GOOGL's ability to navigate challenges and capitalize on opportunities in the rapidly evolving tech landscape.
Further, considering its high profit margins, its strategic investments in key growth areas like AI and cloud computing, and its strong market position, investing in GOOGL appears to be a wise decision.
How Does Alphabet Inc. (GOOGL) Stack Up Against Its Peers?
While GOOGL has an overall grade of B, equating to a Buy rating, you may also check out these other stocks within the Internet industry: Despegar.com, Corp. (DESP), Travelzoo (TZOO), and Yelp Inc. (YELP), with an A (Strong Buy) rating.
To explore more A and B-rated Internet stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
GOOGL shares fell $6.92 (-4.35%) in premarket trading Thursday. Year-to-date, GOOGL has gained 9.35%, versus a 5.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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