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Alphabet Likely to Gain Big in Near Future Following Q4 Earnings Today

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Internet search engine behemoth Alphabet Inc. (GOOGL - Free Report) is set to report fourth-quarter 2024 earnings results on Feb. 4, 2025, after the closing bell. The stock currently carries a Zacks Rank #3 (Hold) and has a positive Earnings ESP of 5.96%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that for stocks with the combination of a Zacks Rank #3 or better (Rank #1 or 2) and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

Factors to Consider

Alphabet is riding on strong cloud and search growth. Google Cloud is benefiting from accelerated growth across AI infrastructure, enterprise AI platform Vertex, generative AI (Gen AI) solutions and core Google Cloud Platform products. GOOGL’s strong AI portfolio is helping it attract new customers, win larger deals, and deepen product adoption among existing customers. 

Google Cloud has solidified its position as the third-largest provider in the highly competitive cloud infrastructure market against Amazon.com Inc.’s (AMZN - Free Report) cloud arm, Amazon Web Services, and Microsoft Corp.’s (MSFT - Free Report) Azure.

Alphabet’s expanding GenAI capabilities present a potential catalyst for future growth. GOOGL’s dominant position in the search engine market is a strong growth driver. Major search updates and the removal of bad ads to enhance the search results continue to boost traffic on GOOGL’s search engine.

Alphabet is seeing strong demand due to an innovative AI infrastructure. GOOGL offers customers a range of AI accelerator options, including multiple classes of NVIDIA Corp.’s (NVDA - Free Report) GPUs and custom-built TPUs.

GOOGL is cashing in on the increasing demand for Large Language Models with its most powerful AI model called Gemini. Google Bard and Search Generative Experience are powered by Gemini Pro to deliver an enhanced user experience. Google Cloud offers Duet AI, which provides pre-packaged AI agents that assist developers in writing, testing, documenting and operating software. 

The chart below shows the price performance of GOOGL compared with other “Magnificent 7” Stocks in the past month.

Zacks Investment Research
Image Source: Zacks Investment Research

Solid Earnings Estimate Revisions for GOOGL Stock

For fourth-quarter 2024, the Zacks Consensus Estimate currently shows revenues of $81.38 billion, suggesting an improvement of 12.5% year over year and earnings per share (EPS) of $2.12, indicating an increase of 29.3% year over year. GOOGL beat on earnings seven quarters in a row.

At present, the Zacks Consensus Estimate indicates a year-over-year increase of 16.6% and 38.3%, respectively, for revenues and EPS in 2024. Even after this strong performance, the current Zacks Consensus Estimate for 2025 revenues and EPS reflects an upside of 12% and 11.3%, respectively.

The Zacks Consensus Estimate for 2025 earnings has improved 0.1% over the last 30 days. GOOGL currently has a long-term (3-5 years) EPS growth rate of 17.3%, well above the S&P 500’s long-term EPS growth rate of 12.4%.

Zacks Investment Research
Image Source: Zacks Investment Research

Attractive Valuation of GOOGL Shares

Alphabet currently carries the forward P/E of 22.84X for the current financial year, compared with 24.50X of the industry and 18.26X of the S&P 500. GOOGL has a return on equity of 31.66% compared with -0.75% of the industry and 16.89% of the S&P 500 Index. The stock currently provides the lowest forward P/E among the “Magnificent 7” stocks. 

At present, the short-term average price target of brokerage firms for the stock represents an increase of 6.6% from the last closing price of $201.23. The brokerage target price is currently in the range of $185-$240. This indicates a maximum upside of 19.4% and a maximum downside of 8%.

Zacks Investment Research
Image Source: Zacks Investment Research

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