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Bull of the Day: Alphabet (GOOGL)

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Headquartered in Mountain View, CA, Alphabet Inc. (GOOGL - Free Report) is a technology company that seemingly dabbles in everything, and over the last few years, the company has evolved from primarily being a search-engine provider to building a widely-used cloud computing platform, ad-based video and music streaming, autonomous vehicles, healthcare providers, and many other offerings.

Blowout Q1 Earnings

Last week, GOOGL reported first-quarter earnings results that shattered expectations.

Revenue for the period rose 34% year-over-year to $55.3 billion, while earnings increased by 166% to $26.29 per share.

The company saw very strong growth in all of its business segments and geographical regions. Notably, sales in its Asia-Pacific region surged 44%, while Google Cloud revenue jumped 46% over the prior-year period.

Investors also cheered Alphabet’s decision to boost its share buyback program by $50 billion after already spending $34.1 billion on buybacks over the last four quarters.

Another thing worth highlighting is the company’s incredible balance sheet. GOOGL has net cash, equivalents, and short-term investments of more than $121 billion at its disposal, while free cash flow rose to over $13.3 billion during the quarter.

GOOGL Breaks Out

 

Shares (specifically, the vote-enabled Class A shares) of the tech giant have been on a tear this year, up over 34% so far compared to the Nasdaq’s gain of about 8%. Earnings estimates have been rising too, and GOOGL is a Zacks Rank #1 (Strong Buy) right now.

For fiscal 2021, 14 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $69.05 to $84.97 per share, reflecting bottom-line growth of 45%. Analysts are bullish about 2022 as well, and GOOGL is expected to continue to generate strong profits next year.

Going forward, Alphabet and its management team are confident about the company’s position in the tech sector. On the Q1 earnings call, Chief Business Officer Phillip Schindler explained how the company’s omnichannel focus will be a huge benefit:

“Over the last six months, people's shopping preferences have shifted constantly in response to changing conditions. It's not just online, it's not just offline, it's a mix. And that's our sweet spot with Search, Maps, and YouTube…omnichannel is here to stay.”

And with one of the biggest net cash positions of any business, Alphabet has plenty of ways to drive future earnings and revenue growth, as well as turn a profit on the currently unprofitable Cloud and Other Bets segments.

If you’re an investor searching for a tech stock to add to your portfolio, make sure to keep GOOGL on your shortlist.

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