Search & Find Advertising Revenue: Alphabet High: Why Alphabet Stock Is Having a Strong Year | message
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by Sven Parplies, Euro on Sunday
V.Many tech firms have benefited in the pandemic because people have withdrawn to their homes and the internet. At Alphabet, the situation is a little more complicated: the number of clicks on the Google search engine increased. The video portal YouTube was also heavily used as a pastime. Above all, Alphabet earns money with advertising. While many retailers stepped up their campaigns on the Internet, important customers, for example from the travel industry, cut their budgets.
Business is now normalizing. For Alphabet this means: strong growth. The advertising revenues increased in the first quarter by 32 percent to 44.7 billion dollars. Operating profit rose from $ 8 billion to $ 16.44 billion. Analysts had only twelve billion profit on the slip.
Alphabet boss Sundar Pichai also highlighted one of the smaller, but nonetheless prominent business areas: the cloud. Alphabet offers customers software and computing power there via external servers. The group increased sales with these services in the quarter by 45 percent, also to a considerable extent. With a little more than four billion dollars in quarterly sales, Alphabet is small there compared to Amazon and Microsoft.
In addition to the results, CFO Ruth Porat also had something extra ready: Alphabet is starting a share buyback program. Own shares are to be bought for 50 billion dollars. The buybacks are intended to support the share price and polish up key figures such as earnings per share.
The long-term prospects for the group remain good: the economic upswing after the hard Corona crash has only just begun. The states are fueling the comeback with economic stimulus programs, more and more people are being vaccinated, and many consumers have saved money. Above all, the travel industry, which is important for Google, is hoping for a fresh start.
The other bets
The smaller activities are more difficult to assess than Alphabet’s core business. These “other bets,” which include autonomous driving technologies or delivery drones, burned $ 1.15 billion in the quarter. Sales were unspectacular at just under $ 200 million. Even if few of these bets work, the investments should pay off in the long run. The cloud business is also currently still a burden with a quarterly loss of 974 million dollars, but should make the leap into the profit zone if growth continues.
There was a lot of praise for Alphabet from stockbrokers after the latest business figures. The share rose spontaneously by around five percent. The data service Bloomberg recorded more than a dozen buy recommendations from analysts. The price targets range up to $ 3,100, the equivalent of around 2,570 euros.
Upswing: Google and YouTube are clear winners of the economic turnaround. The other bets are an extra chance. Still attractive.
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