Alphabet All Set to Challenge Street’s Q1 Estimates: Analyst

California-based Alphabet, Inc. (NASDAQ: GOOGL) is a multinational technology conglomerate that was created in 2015 through a restructuring of Google. It is now the parent company of Google and its subsidiaries.

With a market cap of $1.72 trillion, Alphabet is one of the highest-valued companies in the world.

Alphabet’s Internet media business Google generates 99% of the company’s total revenue mainly through online advertisements, sales of apps and content on Google Play and YouTube, cloud services fees, and the sale of smartphones and smart homes products.

With the company’s first-quarter results around the corner, let’s take a look at what Brian White, an analyst with Monness, has to say.

Q1 Projections

White expects Alphabet’s first-quarter revenue and EPS to come in line with his estimates of $72.34 billion and $29.11, respectively. The Street anticipates the company to report revenue of $68.11 billion and EPS of $25.71.

The analyst further expects Google Services revenue to total $66.07 billion, up 29% year-over-year, and Google Cloud revenue to increase 46% to $5.90 billion.

Within the Google Services segment, White expects Google Advertising revenue to rise 32% year-over-year to $59.18 billion, driven by Google Search & Other and YouTube Ads revenue.

Q2 Guidance

For the second quarter of 2022, the analyst expects Alphabet to report sales of $75.42 billion, higher than the Street’s estimate of $71.95 billion. Additionally, he anticipates EPS to come in at $30.04 versus the Street’s projection of $27.36.

Analyst’s Opinion

White has reiterated a Buy rating on the stock with a price target of $3,850 (48.1% upside potential).

He said, “We believe Alphabet will continue to benefit from the secular digital ad trend and experience strength in the cloud; however, we expect antitrust investigations to carry on.”

“With sales up 23% per annum over the past five years, operating profits growing 27% and a dominant position in search with a leadership in digital advertising, we believe Alphabet should trade at a healthy premium to the market and tech sector,” White added.

Consensus Rating

Overall, the stock has a Strong Buy consensus rating based on 31 unanimous Buys. Alphabet’s average price target of $3,510.60 implies 35% upside potential from current levels. The stock has gained 14.1% over the past year.

Bloggers are Positive

TipRanks data shows that financial blogger opinions are 97% Bullish on Alphabet, compared to the sector average of 68%.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR), the world’s biggest website usage monitoring service, offers insight into Alphabet’s performance.

According to the tool, Alphabet’s website traffic registered a 13% rise in global visits in March, compared to February. Further, the footfall on the company’s website has grown 259.4% year-to-date against the same period last year.

Conclusion

According to the analyst, even though “Alphabet has managed to sidestep recent digital advertising headwinds, the company remains vulnerable to growing antitrust sentiment in the U.S. and Europe.”

We, at TipRanks, believe that the tech giant will continue to gain from the digitization wave that started with the onset of the COVID-19 pandemic.

Discover new investment ideas with data you can trust.