- Alphabet soared as much as 10% on Wednesday after it revealed stronger-than-expected fourth-quarter earnings.
- The parent company of Google search also revealed a 20-for-1 stock split, which could lead to inclusion in the Dow Jones.
- Here's how three Wall Street analysts reacted to Alphabet blockbuster fourth-quarter earnings.
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Alphabet stock rose as much as 10% on Wednesday after the parent company of Google search revealed a blockbuster fourth-quarter earnings report that surpassed analyst expectations.
Included in the report was the announcement that Alphabet would enact a 20-for-1 stock split later this year, making the stock more accessible to retail traders, and teeing it up to potentially be included in the price-weighted Dow Jones Industrial Average.
Here were the key numbers:
Revenue: $75.3 billion, versus analyst estimates of $71.8 billion
Earnings per share: $30.69, versus analyst estimates of $27.3
Strong advertising trends continued to boost Alphabet's Google search, Google network, and YouTube ads business, generating a total $61.2 billion in revenue. Google's Cloud business generated revenue of $5.5 billion in the quarter, representing year-over-year growth of 44%. Meanwhile, Google's "Other Bets" division, which includes Waymo and Life Sciences, saw revenue of just $181 million, representing a year-over-year decline of about 8%.
"Our deep investment in AI technologies continues to drive extraordinary and helpful experiences for people and businesses, across our most important products. Q4 saw 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 continuing to grow strongly," CEO Sundar Pichai said.
Here's how three Wall Street analysts reacted to Alphabet's fourth-quarter earnings report.
Stifel: "Upside to revenue and profits... continues to drive growth at scale."
Stifel raised its price target to $3,500 from $3,200, and reiterated its "Buy" rating.
"Looking to 2022, we are raising our Google Services estimates as the company is expected to continue benefiting from broad-based advertiser strength and healthy consumer activity online. Management's outlook calls for a strong pace of hiring, ramping Cloud investments, and a meaningful increase in CapEx during 2022. While we expect elevated investment will limit margin expansion versus 2021, we raise our margin expectations for the full year as ongoing revenue outperformance largely offsets incremental investments," Stifel said.
RBC: "An unexpected 20-for-1 stock split should provide some retail tailwinds."
RBC raised its price target to $3,500 from $3,400, and reiterated its "Outperform" rating.
"The 20-for-1 stock split is coming July 1. It's unclear if institutional buying in anticipation of likely May/June retail buying will more quickly capture the upside, but this move helps given that it will perfectly coincide with the deceleration period we've called out... The stability of the core business's growth rates should give renewed long-term confidence, but we see noticeably absent forward commentary from management as portending the coming deceleration we previewed," RBC said.
Goldman Sachs: "Search demonstrates strong commerce and economic environment."
Goldman Sachs raised its price target to $3,400 from $3,350, and reiterated its "Buy" rating.
"We continue to see Alphabet as the leading collection of AI/machine learning-driven businesses in our coverage universe and view the company as uniquely positioned to capitalize on the blurring of the lines between advertising, commerce and media consumption business models in the years ahead. Google Cloud should be a tailwind for consolidated revenue growth over our 5 year forecast period and begin to contribute demonstrable rate of change to consolidated operating income margins in 2023-2026," Goldman said.