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alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) reported first quarter earnings yesterday (April 24th) and stock market investors liked what they saw. As I write, the alphabet stock price is set to open more than 5% higher late today.
However, even after this bounce, it is about 18% lower than its peak in early February. As a result, I think this is S&P 500 Tech Juggernaut is underrated and worth considering.
Let’s dig into the numbers and see why Google owners share prices are higher than they do today.
A very impressive quarter
Since ChatGpt entered the scene in late 2022, investors have been worried about the impact of Google’s search business (Alphabet’s Ultimate Cash Cow). People will use chatbots to find things (and perhaps one day shop online), and their entire business model will be under threat.
That’s because advertisers prefer to go where their eyes are. ITV ).
To be fair, I am also concerned about this risk. However, we only see no evidence of confusion from the generated AI in our financial results. In fact, it’s the exact opposite.
In the first quarter, revenues rose to 12% (14% in certain currencies) to $90.2 billion year-on-year. For those who maintain their score, that amounts to eye-opening $1 billion in revenue. Per day!
There have been significant advances across the business as Google Search, YouTube Ads, Google Subscriptions, Platforms, Devices and Cloud sectors each offer double-digit growth. Despite some weaknesses in the network segment, overall ad revenues rose 8.5% to $669 billion
Earnings per share (EPS) was $2.81, much higher than the expected $2.01. Elon Musk’s rocket company was valued at around $3500 billion at the turn of the year.
CEO Sundar Pichai commented:The AI overview is on a very good pace with over 1.5 billion users per month and is excited by the early positive response to AI modes [chat-style AI]. There’s so much more… The differentiated, fully stacked approach to AI continues to be at the heart of our growth. ”
Large-scale buyback
The board also allowed a 5% dividend hike and an additional share buyback program. $70 billion! This adds to the previous massive buybacks, representing roughly 74% of Alphabet’s $95.3 billion cash equivalent.
Looking at the ratings, buying back makes a lot of sense. At this time, the positive price (P/E) ratio of the stock is approximately 19. This is the cheapest of the so-called 7 tech stock groups.
risk
Alphabet stock does not come without risk. One is a potential economic slowdown that could undermine its core advertising business.
Meanwhile, Temu and Shein, both invest heavily in Western marketing, are expected to cost less as tax-free freight to the US in a package that costs under $800.
Finally, there is a risk that Google’s Search Empire may still be split by regulators. If that happens, it could destroy valuable synergies across ads, data, and AI development.
Still great value
Nonetheless, I think this tech stock is quite undervalued and worth a closer look.
Businesses seem to be getting stronger, but that emotional storage of data offers a frightening advantage in the coming age of AI.
