Why Alphabet Stock Is Up By 6% Today

Alphabet Stock Rallies After Strong Earnings Report

Shares of Google’s parent Alphabet surged to new all-time highs after the company released its fourth-quarter report.

Alphabet reported revenue of $75.32 billion and earnings of $30.69 per share, easily beating analyst estimates on both earnings and revenue. The company’s CFO Ruth Porat stated that Alphabet’s results “reflected broad-based strength in advertiser spend and strong consumer online activity, as well as substantial ongoing revenue growth from Google Cloud”.

Alphabet has also noted that it will have a 20-for-1 stock split. At a price of almost $3,000, Alphabet shares are too expensive for some investors. The split will make the stock more “affordable” and widen the pool of potential investors.

What’s Next For Alphabet Stock?

Analysts expect that the company will report earnings of 112.4 per share in 2022, so the stock is trading at roughly 26 forward P/E, which looks like a reasonable valuation for a dominant tech company with healthy growth rates.

Interestingly, some traders used the post-report optimism to get out of Alphabet stock, which moved from the $3,000 level towards the $2,900 level but maintained healthy gains for the day.

When profit-taking is over, Alphabet stock would have a good chance to settle back above the $3,000 level and get to new highs. The stock remains reasonably valued, especially if we compare it to smaller peers in the tech space, which do not have Alphabet’s market power but trade at higher multiples.

In addition, the growth of Google Cloud will likely serve as a material bullish catalyst for the stock as this segment will likely remain a top performer in the upcoming years as the world’s demand for cloud services continues to grow at a healthy pace.

Most likely, analysts will rush to update their models after the successful earnings report, so the consensus estimate for Alphabet’s earnings will move higher in the upcoming weeks, serving as an additional positive catalyst for the stock.

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