Case Study: What Credible analysts are saying on Google (GOOGL) stock
Key Points
Performance
Alphabet (GOOG) (GOOGL) shares rose by 7.36% this week, pushing their year-to-date gains up to 17.57%. This compares favorably to the S&P 500 and the Nasdaq Composite index, which are up by 8.17% and 15.6%, respectively, during 2023 thus far.
Event & Impact
Alphabet posted fourth quarter results this week, missing Wall Street estimates on both the top and bottom lines. During Q4, GOOGL’s revenue totaled $76.05 billion, missing Wall Street’s consensus estimate by $440 million, but representing 1.0% year-over-year growth. Alphabet’s’s Q4 GAAP earnings-per-share came in at $1.05, missing estimates by $0.14/share.
Noteworthy News:
A slowdown in digital advertising during today’s tough economic environment is hurting Alphabet’s sales. The company’s YouTube segment struggled the most, falling by 7.7% on a year-over-year basis. Also, as credible Nobias author Growth at a Good Price points out, this company also faces antitrust scrutiny from United States regulators.
Nobias Insights
61% of recent articles published by credible authors focused on Alphabet shares offer a “Bullish” bias. 9 out of the 9 credible credible Wall Street analysts who cover GOOGL believe shares are likely to rise in value. The average price target being applied to GOOGL by these credible analysts is $131.56, which implies upside potential of approximately 25.6% relative to the stock’s current share price of $104.78.
Bullish Take Growth at a Good Price, a Nobias 4-star rated author, said, “Google today does not have the premium price tag you'd associate with a dominant player; it's actually one of the cheaper big tech names out there. So, it looks like a bargain.”
Bearish Take Daniel Howley, a Nobias 4-star rated author, said, “Google's ad revenue fell from $61.2 billion in Q4 2021 to $59 billion in Q4 2022. YouTube ad revenue, meanwhile, missed analysts' estimates, coming in at $7.9 vs estimate versus $8.2 billion.”
GOOGL Feb 2023
Alphabet was one of many big-tech companies that reported earnings this week, yet unlike rivals such as Tesla (TSLA), Meta Platforms (META) and Apple (AAPL), all of which rallied after their recent earnings reports, Alphabet shares sold off in response to the numbers that they posted.
Alphabet missed Wall Street’s consensus estimates on both the top and bottom lines during Q4, causing the stock to dip by 2.75% on Friday. Yet, it’s important to note that this sell-off comes after a very strong week for the stock and the tech space overall and therefore, even with Friday’s weakness in mind, GOOGL shares finished the week up by 7.36%. This weekly rally pushed Alphabet’s 2023 returns up to 17.57%. This performance beats the S&P 500 and the Nasdaq Composite by a wide margin. Those two indexes are up by 8.17% and 15.60%, respectively, on a year-to-date basis thus far.
Bullish Nobias Credible Analysts Opinions:
Prior to Alphabet’s recent earnings announcement, Growth at a Good Price, a Nobias 4-star rated author, published a bullish report on the company, highlighting their willingness to buy the dip when it comes to the stock’s recent sell-off related to antitrust allegations.
Growth at a Good Price stated, “On Wednesday [January 25th, 2023] Google slipped 2.5%, when the NASDAQ-100 only fell 0.18% on the same day. The stock's move coincided with news that the Department of Justice ("DOJ") was suing the company for anti-competitive practices, specifically in its advertising business.”
The author continued, “It seems likely that the DOJ's lawsuit was the cause of Google's selloff on Wednesday.” They noted that the threat here is real. “For example,” Growth at a Good Price wrote, “Google recently got sued for $4 billion and lost its appeal-it will quite likely be forced to pay the amount out. There are countless examples of Google and other big tech companies being sued for large amounts of money, sometimes successfully.”
They went on to say, “As far as monetary compensation goes, investors may need to accept that there'll be a payout in the future. It won't be any time soon-the DOJ's 2020 lawsuit isn't going to trial until 2023-but it might happen eventually. If you're uncomfortable with a $5 billion settlement in a few years' time, then maybe GOOG isn't the stock for you.”
Continuing to list threats, the author noted, “the big thing with the Google lawsuit is that it's seeking much more than a mere monetary reward: it wants to unwind part of Google's business.” But, with this in mind, they stated that government regulators haven’t had as much success attempting to do this to big-tech players.
“For example,” Growth at a Good Price wrote, “in the 1990s, the Federal Trade Commission ("FTC") sued Microsoft, alleging that it had violated the Sherman Antitrust Act. The FTC initially won on a few of its claims, but parts of the lawsuit were eventually overturned by the D.C. Court of Appeals. Microsoft was not broken up.”
Ultimately, they concluded, “The bottom line on the DOJ's Google lawsuit is that it just confirms what bulls have always said about the stock: That it's a rock solid tech company with a dominant market position, that deserves a premium price. The whole reason the DOJ is upset at Google is because it's the dominant player in its industry, and they're right about that.”
“However,” the author continued, “Google today does not have the premium price tag you'd associate with a dominant player; it's actually one of the cheaper big tech names out there. So, it looks like a bargain.” And therefore, Growth at a Good Price stated, “I'm buying the DOJ lawsuit, and I'll probably be buying if the stock dips after earnings, too.” Growth at a Good Price got the dip they were looking for when GOOGL shares fell by 2.75% on Friday after the market digested its fourth quarter numbers.
Bearish Nobias Credible Analysts Opinions:
Daniel Howley, a Nobias 4-star rated author, covered Alphabet’s Q4 earnings when they were announced this week in an article that he published at Yahoo Finance. Howley wrote, “Google parent Alphabet (GOOG, GOOGL) announced its Q4 earnings after the bell on Thursday, falling short of expectations on revenue and earnings per share, as advertising declined year-over-year.” He continued, “Here are the most important numbers from the report, compared to what Wall Street was expecting, as compiled by Bloomberg.
Revenue (ex-TAC): $63.12 versus $63.2 billion expected
Earnings per share: $1.05 versus $1.18 expected”
Regarding Alphabet’s business segment performances, Howley said, “Google's ad revenue fell from $61.2 billion in Q4 2021 to $59 billion in Q4 2022. YouTube ad revenue, meanwhile, missed analysts' estimates, coming in at $7.9 vs estimate versus $8.2 billion. Google Cloud, meanwhile, lost $830 million in Q4, better than the $1.7 billion it lost in the same quarter last year.”
Abner Li, a Nobias 4-star rated author, also covered Alphabet’s Q4 results in an article published at 9to5Google.com. Li touched upon the company’s fundamental and operating results and then highlighted quotes from the company’s upper-level management from the fourth quarter report.
Li quoted Alphabet’s CEO, Sundar Pichai, saying: “Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond. There’s also great momentum in Cloud, YouTube subscriptions, and our Pixel devices. We’re on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Li also noted that Alphabet’s CFO, Ruth Porat, said: “Our Q4 consolidated revenues were $76 billion, up 1% year over year, or up 7% in constant currency, and $283 billion for the full year 2022, up 10%, or up 14% in constant currency. We have significant work underway to improve all aspects of our cost structure, in support of our investments in our highest growth priorities to deliver long-term, profitable growth.”
Overall bias of Nobias Credible Analysts and Bloggers:
Despite the stock’s Q4 top and bottom-line misses, the majority of credible authors and analysts that the Nobias algorithm tracks continue to be bullish on shares. 61% of recent articles published by credible authors focused on GOOGL shares have expressed a “Bullish” bias. Furthermore 9 out of 9 credible Wall Street analysts who have offered an opinion on Alphabet believe that GOOGL shares are likely to head higher.
Currently, GOOGL shares trade for $104.78 and the average credible analyst price target being applied to them is $131.56. Therefore, even with the stock’s year-to-date rally of 17.5% in mind, the credible analyst average target implies further upside potential of approximately 25.6%.
Disclosure: Nicholas Ward is long GOOGL. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.