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  • Writer's pictureJohn Tasci

Alphabet Inc (GOOGL) Fundamental Analysis and Ratings


Company profile


Alphabet Inc, the parent company of Google, specializes in internet services. Google began in 1996 by Larry Page and Sergey Brin as a research project at Stanford University. Their mission was to make search engines so we can understand the whole world. Google is best known for its search engine, which it dominates. 92.57% of search engine queries are done on Google. Trailing behind is Bing with 3.04% and Yahoo with 1.24%. Google has over 1 billion active users. Their primary source of revenue comes from search ads (57%). Alphabet also has different products and companies.


Major Companies Alphabet Owns

  1. Google

  2. Android

  3. Mandiant

  4. Fitbit

  5. Looker

  6. Nest

  7. Waze

  8. DoubleClick

  9. YouTube

For a complete list of companies that Alphabet Inc owns check out Daily News.


Alphabet continues to innovate and has a ton of software products including Google Search, Google Chrome, Google Docs, Google Calendar, Google Photos, Google Meet, Google Drive, Google Finance, Google Play Books, Google News, Google Earth, Google Ad Manager, Google Play, Google Maps, AdSense, Gmail, Google Groups, etc.


Alphabet Inc employs 186,779 and compensates them well beyond average. Google only hires top talent and they make that known with their products and services.



Key Data


Stats Provided by Nasdaq (1/7/2023)

​Exchange

​NASDAQ-GS

Market Cap

1.141 Trillion

Sector

Technology

Price to Earnings Ratio

17.51

Industry

Internet and Information Services

Forward P/E 1 Yr.

18.54

1 Year Target

$130.00

Earnings Per Share (EPS)

$5.04

Share Volume

17,858,281

52 Week High / Low

$152.1 / $83.45

Average Volume

27,855,895

Beta

​1.10


Alphabet Inc. Valuation


Valuation Statistics

Price / Book (P/B)

4.43

Price / Cash Flow

​18.74

Price / Sales

4.44

Price / Earnings

​17.23

  • Average P/B Ratio of Internet Content & Information is 3.84

  • Average P/CF Ratio of Internet Content & Information is 11.67

  • Average P/S Ratio of Internet Content & Information is 3.58

  • Average P/E Ratio of Internet Content & Information is 17.52

Tech stocks tend to have higher-than-average valuations because of their high growth and continuous innovation. Today's valuation of Alphabet meets the average ratios of its sector. P/B and P/S ratios are above average, but not by too much. That's average for a company. P/CF and P/E ratios are below average which shows that the company is undervalued with its cash flow and undervalued.


Industry-wise, Alphabet is fairly valued, but as a company, it still has a lot of potential. The low P/E ratio makes it an attractive investment. Revenue continued to increase in 2022, while profit decreased. As inflation slows down and interest rates fall in the future, Alphabet will get a chance to create new all-time highs.



Alphabet Inc. Swot Analysis

​Strengths

  • Speed and Simplicity

  • Strong Brand Reputation

  • Default Search Engine

  • 92% Search Engine Control

  • Diverse Products and Portfolio


Weaknesses

  • Trailing behind on hardware electronics

  • Highly dependent on search ads

  • Low presence in retail / brick-and- mortars

  • Android is looked down on

  • Slow Customer Service

  • Minimal social media presence

Opportunities

  • Advance their technology with their high talent

  • Expand the Chromebook market worldwide

  • Open retail stores

  • Fitbit, Google Pixel, and Chromebook have the potential to be major competitors

  • Increasing use of cloud computing

Threats

  • Expensive cost for advertisers compared to other platforms

  • An increasing number of competitors

  • Fairly new to some markets

  • Several antitrust lawsuits in USA and Europe

  • Criticized for anti-encryption

  • Major Competitors - Apple, Amazon, Microsoft, Meta


Alphabet Inc. Balance Sheet Overview



Images by Macrotrends


Looking at Alphabet's quarterly balance sheet, one noticeable thing is that the company has remained flat in its total assets over the year, while total assets from 2017 to 2021 have risen steadily. 2021 and 2022 total assets should remain similar when 2022 annual balance sheets are reported.


Total liabilities have increased year over a year keeping up at the same rate as the total assets change.


Overall, from the balance sheet, we can see that Alphabet has remained strong even throughout the upcoming recession. Alphabet experienced heavy growth from 2017-2021 and can maintain 2021 numbers in 2022. So, Alphabet wasn't a pandemic hoax like several tech stocks whose earnings couldn't keep up with the valuation.


Alphabet Inc's balance sheet remains strong and shows no signs of worry and will continue to increase every year.



Alphabet Inc. Income Statement Overview




Data Provided by Macro Trends


Alphabet Inc has kept consistent revenue growth from 2017 - 2020. Then in 2021 experienced a huge jump in revenue. This was due to the spike in users and internet usage during the pandemic.


Revenue growth of Alphabet Inc

  • 2017 - 12.77% Y/Y Change

  • 2018 - 23.42% Y/Y Change

  • 2019 - 18.30% Y/Y Change

  • 2020 - 12.77% Y/Y Change

  • 2021 - 41.15% Y/Y Change

  • 2022 - 10.90% Y/Y Change (Projected)


Alphabet Inc's gross profit margins are also strong, reaching 57% in 2021.


2022 revenue is projected to increase year over year while net income is expected to decrease. Net income has decreased in each quarter of 2022. Inflation, war, and the economy have contributed to the drop in net income.


It's hard to come up with conclusions based on 2021 and 2022 considering how different both years were. 2021 was a rich growth stock rally and 2022 was a destruction for the stock market. Alphabet's future forecasts should be researched further to calculate the opportunities for growth because they're reaching peak financials and earnings cool down. Alphabet might be considered a value stock in the future rather than growth.



Alphabet (GOOGL) technical analysis


Technical analysis report brought to you with the trading review.


1-month Summary of Alphabet Inc

Oscillators & Moving Averages Signal



Outline of Oscillator Results



Outline of Moving Averages Result



Technical analysis indicators show that Alphabet stock is a sell.


Technical analysis combined with fundamental analysis helps you create a price entry to a stock, but the technical analysis shouldn't be your primary research. It's more so used for short-term trades or timing purchases.


A good company will continue to rise and get past hard times, growth stocks like Alphabet get crushed in market downturns and flourish during uprises. But, in the future, this will change for Alphabet as the company is beginning to slow down.



Alphabet (GOOGL) Stock Price Forecast


Price, target, rating, and forecast data are provided by Stock Analysis. This data is sourced from Wall Street analysts and other sell-side and buy-side analysts.


Analyst price targets were provided on 1/5/2023 with a current price of $87.34.



Low

Average

Median

High

Price

$93.93

​$128.97

127.50

$177.98

Change

7.55%

47.66%

45.98%

103.78%

According to 56 Wall Street analysts, the average 12-month stock price forecast for GOOGL stock is $128.97, which predicts an increase of 47.66%. The lowest target is $93.93 and the highest is $177.98. 16 analyst rate GOOGL stock a "Strong Buy", 35 analysts "Buy", 5 analysts "Hold", and 0 analysts for "Sell and Strong Sell".


Analyst consensus for GOOGL stock is a buy!



Analyst Ratings



Financial Forecasts


Alphabet's revenue is expected to slow down in the next 5 years, reaching only single-digit increases in 3 of the 5 years. Earnings per share are expected to grow by double digits every year so Alphabet will be more profitable.



Revenue Forecast


Revenue Growth Forecast


EPS Forecast


EPS Growth


Analyst forecasts indicate that Alphabet's financials will stay stable in the future. The average forecasted price of $128.97 is reasonable due to Alphabet becoming undervalued from the bear market. With the S&P 500 returning an average of 10% yearly, GOOGL expected price target provides a 47.66% increase in the next 12 months. Keep GOOGL on your watchlist, as the market recovers, Alphabet is sure to increase.



Alphabet (GOOGL) Stock News and Macroeconomics Affecting the Company


Tech layoffs have started at major companies like Salesforce cutting 10% of its global workforce and Amazon cutting 18,000 workers. Rumors have been spread that Alphabet will be laying off staff.


Alphabet is looking to change its performance review system. It will make it harder for workers to receive high marks and easier for them to receive low marks. Under this new rule, 6% of Alphabet's employees can be at risk of losing their job.


Layoffs could be positive or negative, it's all based on the reasoning. If the company is looking to restructure like Alphabet, then it could be positive in the long term. Contrasting, if the company is reducing staff to remain profitable, the stock price will go down.


Google has been shown as an automatic company at CES 2023. Two cars were featured at Google's booth in Las Vegas - the BMW i7 with new Android Auto and Volvo EX90 with Google built in.


On the macro side, inflation has started to cool down and has hit 7.1% for the 12 months that ended in November 2022. Interest rates are 4.25% to 4.5% and expect another three-quarters percentage point in 2023. The Fed should stop raising interest rates in the near future when inflation goes down to normal.



Dividends


GOOGL stock currently has no dividends. Alphabet doesn't seek to pay dividends as they want to continue innovating and expanding. Alphabet's competitors Apple and Microsoft pay dividends. Apple paid 0.71% and Microsoft paid 1.21% respectfully. Alphabet doesn't look to copy its competitors, so this isn't the right stock for you if you want dividends.


My Rating on Alphabet Stock

I don't own shares of Alphabet Inc, but I do have it on my watchlist. Google is the main search engine for the world and connects everyone to the world. In the near future Alphabet will return to dominance with a tech rally. The stock market is in a bear market, creating a great opportunity to build more equity, and the price target will continue to increase.


I have Alphabet Inc as a buy and a 12-month forecast of $110.00. That's around a 26% gain from the current value. This forecasted price was calculated by using the projected earnings per share of 2023 which is $5.39. The economy will recover and Alphabet will be able to recover end of the year. $110 price and $5.39 earnings per share give it a P/E ratio of 20.4 which is lower than Apple, Microsoft, and Amazon.


This is not financial advice, this is Tasci's advice. Research more about Alphabet and see if it fits your views as an investor. You can purchase Alphabet stock on Robinhood and receive free stock when you open an account.


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