„Alphabet stock remains attractive in the long term.“

Last Updated: 31. Januar 2024By

Tonight, Alphabet became the first technology giant to present numbers for the fourth quarter. Expectations were high, but they were unexpectedly not fully met. However, this is unlikely to shake the positive outlook for the stock.

Revenue, profit and cloud business above expectations At first glance, everything looked good: Revenue in the fourth quarter climbed +15% to $72.32 billion, exceeding the forecast of $70.97 billion. Profit also increased by +56% to $1.64 per share, which was 5 cents more than expected.

In addition, the highly anticipated cloud revenues increased more strongly than forecasted, reaching $9.19 billion instead of the expected $8.95 billion.

Advertising revenue slightly missed the forecast The only area where expectations were not met was advertising revenue, which came in at $65.5 billion instead of the expected $65.8 billion.

Overall, Alphabet’s numbers were far from bad. However, after the stock’s high gains in recent months, investors focused on the small negative and took profits. As a result, the stock price fell by 5% in after-hours trading. In my opinion, this drop is exaggerated.

Alphabet focuses on cost-cutting In the coming quarters, the company is expected to further increase its profitability. A few weeks ago, Google announced the layoff of hundreds of employees in various business areas. This trend follows the company’s attempt to cut costs after a period of rapid expansion during the pandemic, including closing unprofitable areas.

AI drives growth It is also expected that Alphabet will be able to increase its growth rate again. The driving force here is the use of artificial intelligence. In this area, Alphabet is expected to catch up with Microsoft. Last year, Alphabet made numerous efforts to expand its search tools with AI (Bard and Search Generative Experience) and implement new, advanced large language models such as Gemini.

Valuation still relatively moderate In the current fiscal year, the Alphabet stock is valued at 25 times the predicted earnings. This makes the stock relatively moderately valued compared to both historical comparisons (where P/E ratios were mostly between 25 and 30) and other technology giants. From a risk-reward perspective, the stock remains attractive for long-term investors.