“Successful trading is always an emotional battle for the speculator, not an intelligent battle.”
Alphabet, GOOG/GOOGL, just reported a beat in its most recent ER report and currently trades as the largest market cap company in the world today. This comes on the heels of a Facebook report that just crushed it, and an Amazon report that likely had Jeff Bezos silent for once. With that said, it's all systems go for the GOOG and it appears that their addition of Ruth Porat has changed the company's culture and impression on wall street to an "adult company."
Here are the #'s:
Alphabet beats by $0.58, beats on revs (752.00 +9.05)
- Reports Q4 (Dec) earnings of $8.67 per share, $0.58 better than expected of $8.09; revenues rose 18.5% year/year to $21.33 bln vs the $20.76 bln Capital IQ Consensus.
Aggregate paid clicks- Q4 +31%; Q3 +22.8%:
- Paid Clicks on Google websites- Q4 +40%; Q3 +35%.
- Paid clicks on member sites- Q4 +2%; Q3 -5%.
Aggregate cost per click- Q4 -13%; Q3 -11%:
- CPC on Google sites- Q4 -16%; Q3 -16%.
- CPC on member sites- Q4 -8%; Q3 -4%.
Revenue Segments:
- Google Website revenue +20% y/y
- Google Network Member websites +7% y/y
- Google Advertising +17% y/y
- Google Other Revenues +24% y/y
- Operating Expense as % of revenue 36% compared to 37% in prior year
- Free Cash Flow $4.31 bln compared to $2.81 bln in prior year
- TAC As a % of revenue 21% compared to 22% in prior year
This company just flexed its muscle and showed Wall Street (again) that it's not just some gimmick internet clicks company that can't turn profits. Furthermore, even at it's current valuation, the stock trades cheap ~20x forward and could create further room to the upside.
Investors continue to be rewarded for quality in the market even after wild swings that yield negative short term performance.
With its trend lines in tact, the measured move on this one suggest a 909 price target.
EXPECTATIONS
Even after a monster quarter by Facebook last week and the bar being set high, Alphabet was able to briskly hop over the expectations and deliver. An example of this is aggregate paid clicks which destroyed the streets estimates: (Aggregate paid clicks- Q4 +31%; Q3 +22.8%)
So what now for the stock? In the trade report put out yesterday we called for a +7% move in GOOG/GOOGL and a +$55 move in the issue. We were also long the weekly 760 C from last Wednesday and Next week 840/842.5 C.
I'd be a little surprised if this issue pressed like FB did. With market breadth nearing the top of a range and with this stock now the biggest market cap in the world, the law of large numbers does take effect at some point. On a longer time frame however I believe the trend is your friend and this company's new discipline and stellar performance should continue.