The alphabet stock is rising at an impressive rate of earnings
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Shares in Alphabet, Google’s parent company, have risen more than 40% in the past year.
Sean Gallup / Getty Images
Alphabet
shattered expectations and announced plans for a 20-share split after the market closed on Tuesday. Investors liked what they saw.
The Google parent reported sales of $ 75.3 billion in the fourth quarter, up 32% year-over-year, with earnings of $ 30.69 per share.
Analysts asked by FactSet had predicted earnings per share of $ 27.68 shares on revenue of $ 72.3 billion.
“The fourth quarter saw an ongoing strong growth in our advertising business, which helped millions of businesses thrive and find new customers, a quarterly sales record for our Pixel phones despite supply constraints, and our Cloud business continues to grow strongly,” said CEO Sundar Pichai in the company’s earnings report.
The company also announced a share split of 20 for one, subject to shareholder approval. If approved, shareholders registered at the close of business on 1 July will receive 19 additional shares of the same share class for each share they own.
David Wagner, portfolio manager and stock analyst at Aptus Capital Advisors, wrote that the split is the big takeaway, in his view.
“We all know that it does not increase the core value of a company,” he wrote. “But from what we’ve seen in the market with TSLA and NVDA, people like to chase stock splits, for some reason.”
The stock rose 7.1% to $ 2,949.00 in trading after the report.
Ahead of the report, a big question for investors was how many advertisers are switching to YouTube and Google as social media companies continue to struggle with Apple’s 2021 changes in ad tracking.
Last year,
apple
(AAPL) began requiring operating system applications to ask users to sign up for ad tracking. Not many people made that choice, so especially social media apps have struggled to give ad customers data on what actions app users took after seeing ads. Measuring the effectiveness of ads suddenly became much more difficult, so some analysts speculated that advertisers would take the trip to Alphabet’s platforms.
Revenue in Google Search and other segments increased by 36% year-over-year to $ 43.3 billion, while revenue in the YouTube ad segment increased by 25% to $ 8.6 billion. Google Cloud revenue increased 44% year-over-year to $ 5.54 billion.
The positive equity reaction comes among broader concerns about rising interest rates, which have knocked down equities in growth-oriented technology companies by reducing the current discounted value of expected earnings over the years.
Prior to the report, Wagner, portfolio manager and analyst at Aptus Capital Advisors, which owns Alphabet shares in its exchange-traded funds, claimed that Alphabet could achieve 20% growth in earnings per share over the next five years.
“We see Alphabet as one of the best positioned companies in the digital advertising sector, with exposure to some of the technology’s most important secular trends through mobile search, YouTube and cloud computing,” Wagner wrote. “We expect Cloud to become a more central component of the task over time (as business scales and margins improve) and expect Google to continue to capture market growth from the ongoing shift towards digital advertising.”
Last week,
Microsoft
the shares jumped after the company beat expectations for the fourth quarter and increased the outlook for the current quarter. The alphabet seems to keep the ball rolling with its own report.
Write to Connor Smith at connor.smith@barrons.com
