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Bull of the Day: Alphabet (GOOGL)

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For many investors, Alphabet (GOOGL - Free Report) /Google has been the laggard for the frequently discussed ‘FANG stocks’ group. The other companies in the group, Amazon, Facebook, and Netflix, have stolen the limelight and largely left Alphabet/Google investors in the dust. However, if we look to the latest earnings report, it is clear that these trends may be coming to an end, and that Google’s time in the spotlight is at hand once again.

GOOGL in Focus

Alphabet’s first-quarter earnings beat expectations, and the company posted 28% growth year-over-year too. Revenues were also solid, driven by strength in Google Sites revenues, as well as strong sales in a number of their smaller divisions such as Google Play, hardware, and the cloud too.

It is also worth noting that Alphabet’s year-over-year revenue gains in its ‘Other Bets’ segment—also known as its ‘Moonshot’ division—was up nearly 48% too. This area had been a sore spot in past reports, so the recent strength is definitely a good sign for investors.

Shares were up after the report and the stock is now approaching $1,000/share. This represents a fresh high for Alphabet, but there is plenty of reason to think that the gains can continue if we look to recent earnings estimate revisions for the stock.

Recent Revisions

Investors have seen estimates soar for GOOGL stock in the past week, as we have seen nine estimates go higher in the past week compared to zero lower. We have seen a similar trend for the next year time frame, and the current quarter is running at an 8:1 ratio of increases to decreases as well.

The magnitude of these increases has also been impressive, as the consensus estimate has increased by over 5% for the current quarter and the current year in just the past week. Plus, the Earnings ESP for the stock—which represents the most accurate estimate vs. the broad consensus—is positive which suggests that the most recent estimates are even more impressive, and could continue to pull the consensus higher as older estimates fall off the radar.


Alphabet Inc. Price and Consensus

Alphabet Inc. Price and Consensus | Alphabet Inc. Quote


Clearly, analysts believe that some of the positive trends that we saw in the recent earnings report can continue. Who can blame them given Alphabet’s solid gains in mobile search, strong demand for its hardware—like the Pixel phone—and the increased importance of the cloud? No wonder GOOGL has a Zacks Rank #1 (Strong Buy) and why we are looking for the nice trend in this stock to continue.

Bottom Line

The FANG group has been a market leader for quite some time and investors have made plenty off of these companies. However, Alphabet/Google has largely been forgotten in recent trading, as the company has seen its FANG rivals steal the show in recent months.

But if you look to the recent earnings report, that trend might be nearing an end. Google is making great gains in a number of key areas, and analysts seem to be big believers in the company’s earnings potential. So, if you need a solid tech stock option these days, consider the forgotten FANG stock of Google, and its parent company Alphabet, for gains in the near term.


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