Alphabet Stock ( NASDAQ:GOOGL ) is an unexpected casualty of the tech stock crash. Even though Google is a tech stock, you might have thought that its long-term growth, high-profit margins, and $116 billion in cash would have helped the stock price. None of that helped when the stock fell after earnings for the third quarter. While the market keeps focusing on short-term problems with growth and profits, I’m looking ahead to a time when both growth rates and operating leverage will improve. This company has always put a lot of money into long-term growth, and I expect to see the results of those investments even in a challenging macro environment. Because the stock is trading at a good price, this is one of my best ideas on the market right now.
Alphabet Stock Price
Google stock has dropped by 40% from its recent highs. If people used to think that Alphabet was a “safe” stock to own in the tech sector, that idea has been seriously questioned.
The last time I talked about the stock was in December , when I said it was a strong buy because Google Cloud had a lot of hidden value. Since then, the stock has lost 12% of its value, which is strange because it has a lot of good qualities.
How to Value Alphabet Stock
After growing sales by 41% in the third quarter of 2021, Alphabet’s top-line growth was only 6%, but it was 11% when the dollar value was held constant. Even though the headline number for earnings per share (EPS) shows a 24% drop, we should consider non-cash unrealized investment gains and losses. After that change, earnings per share stayed the same from year to year, at $1.24.
Alphabet’s income from ads on YouTube went down year over year, but Google Cloud still grew by 37.6%. Even though sales went up, operating income decreased because the company kept investing in growth. Headcount went up 24.5% year over year and 7.4% s...
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