Alphabet (Google) faced a 5% drop in its stock on July 24th, due to missed revenue estimates for YouTube advertising and concerns over return on investment on AI infrastructure expenditures. Despite this, the stock is currently trading below its fair value estimate of $179. GOOG has seen strong gains of 105% since January 2021, outperforming the S&P 500, but with fluctuations in returns over the years. However, the Trefis High-Quality Portfolio has consistently outperformed the S&P 500, raising questions about GOOG’s performance in the future amidst the current macroeconomic environment.
In the second quarter of FY 2024, Google posted net revenues of $84.7 billion, driven by growth in Google Services and Google Cloud revenues. The operating margin also improved, leading to a 29% increase in net income, reaching $23.6 billion. In FY 2023, the company’s top line grew 9% to $307.4 billion, with an increase in net income to $73.8 billion, driven by growth in several of Google’s businesses. Looking ahead, Google is forecasted to reach revenues of $325 billion in FY 2024, with an improved net income margin leading to a net income of $86.5 billion.
Despite these positive financial results, the stock’s performance in the market has been volatile recently, with concerns over potential underperformance compared to the S&P 500. The Trefis High-Quality Portfolio has consistently outperformed the index, raising questions about GOOG’s future performance in the current economic climate. With annual EPS of $7.01 and a P/E multiple just under 26x, Google is estimated to reach a valuation of $179 in the future.
Overall, Google’s stock faced a significant drop on July 24th due to missed revenue estimates and concerns over ROI on AI infrastructure spending. Despite strong gains since January 2021, the stock’s performance has been inconsistent, raising questions about its future performance compared to the S&P 500. The company’s financial results for FY 2023 and Q2 FY 2024 have been positive, with growth in revenues and net income, pointing towards a positive outlook for the future. However, amidst the current economic uncertainties, Google’s stock may face challenges in outperforming the market in the coming months.
