Yahoo Finance Alphabet Earnings: The Sweet Spell of Success for GOOG Stock
OK kiddos, how do you spell Alphabet? Hint: It begins with "A plus-plus-plus." And so far as Wall Street is concerned, Alphabet (GOOG) spells big revenues and big profits. It's the stock that can't be beat, even as it beats Wall Street.
With advertising driving robust revenues, Google's parent company reported earnings per share of $8.67 on $21.33 billion in revenue. Those figures from the fourth-quarter earnings report -- Alphabet's first as a newly launched umbrella entity -- easily topped analysts' forecast of $8.10 and $20.77 billion.
And insofar as bragging rights, Alphabet claimed the mantle of world's most valuable company, passing Apple (APPL). With GOOG stock bumping up more than 5 percent in after-hours trading Monday, Alphabet's $550 billion in market capitalization easily eclipses the iPhone and MacBook maker's $538 billion.
Such an outcome would've been unthinkable a year ago, when Apple enjoyed close to $775 billion in market cap, while Google stood at less than half that at $366 billion. But these have been rough times for Apple; its disappointing earnings report last week led the company to shed close to $37 billion -- an astonishing amount -- in a single day.
"Alphabet is also in a much better position than Apple to tackle innovation challenges and bring new, appealing products to market," says Clement Thibault, editor of Investing.com. Breaking dependency on the premium smartphone segment "is something Apple has been having a lot of trouble with."
About the only thing Alphabet's leaders were having trouble with Monday, if anything, was popping the corks on the bubbly.
Alphabet's Class A stock (GOOGL) spiked more than 7 percent in the first 10 minutes of after-hours trading Monday. Meanwhile, Alphabet saw its Class C stock (GOOG) jump more than 8 percent after Monday's closing bell. Both stocks retreated slightly after those surges.
"Our very strong revenue growth in Q4 reflects the vibrancy of our business, driven by mobile search as well as YouTube and programmatic advertising, all areas in which we've been investing for many years," Alphabet CFO Ruth Porat says.
And indeed, advertising is the magic word here. It's a key component for Alphabet's success, just as it has been for Facebook (FB), another big winner in the fourth-quarter earnings sweepstakes. Alphabet's earnings shot up 18 percent year over year.
"For the fourth quarter of 2015, Alphabet's paid search dollars grew 8 percent year to year, with the key driver of mobile search seeing 74 percent growth," says Tim Hurst, an analyst with the Roland George Investments Program at Stetson University in DeLand, Florida. "And for 2016, Google's bloodline, digital display video ads are expected to hit $33.5 billion in revenue. For the first time, that will surpass their traditional search ad revenue of $30.1 billion."
"Alphabet is, in my opinion, today's equivalent to what IBM was in the latter half of the 20th Century and more," says Matt Towery, author of "Newsvesting: Use News and Opinion to Grow Your Personal Wealth." "It's hard not to notice that since the FCC ruling on net neutrality [in February 2015], their shares have soared. With such diversity in new products and dominance in their core business, they have become the true blue chip stock for the future."
Meanwhile, Alphabet also introduced a new reporting wrinkle. "We're excited about the opportunities we have across Google and Other Bets to use technology to improve the lives of billions of people," says Porat, referring to the new way Alphabet will categorize its operations.
"Other Bets" now stands as a slot for the company's newer ventures, which Alphabet has broken off from its core Internet businesses and high-tech products.
That's likely to pacify investors, because some of Alphabet's "Other Bets" and pet projects, even if visionary, are just plain wacky by Wall Street standards. Stratospheric Wi-Fi balloons. Levi's smart jeans. (Do they tell you when your waistline needs to lay off the Twinkies?) Self-propelled cars aiming to become Uber without the driver.
But as for Alphabet's core businesses, including Google, they could fund enough side wagers to fill 1,000 casinos. It also bought back 514,000 shares.
Investors, you may place your bets on the odds-on favorite.
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