Google Is Now A $2 Trillion Company: Over Or Undervalued?
Google Is Now A $2 Trillion Company: Over Or Undervalued?
Sign up now and get our FREE SG dividend stock list.
Google's stock went into overdrive, skyrocketing by a staggering 15% in after-hours trading after the release of its Q1 2024 report. In a nutshell, Google blew past all of the analysts' predictions, leaving them in the dust. They reported mind-blowing revenue and profit growth, not to mention their capital distribution.
Brace yourself for the numbers: Google's revenue and operating income shot up by a jaw-dropping 15% and 46% respectively compared to the previous year's first quarter. The commercial momentum behind Search and YouTube played a significant role in this extraordinary performance.
What is happening
Google's stock has been an absolute beast, outperforming the broader U.S. stock market. Year-to-date, Google shares have surged by approximately 23%, leaving the S&P 500 in the dust with its mere 7% gain.
Google's Q1 earnings were nothing short of spectacular. The search engine behemoth reported a mind-boggling $80.5 billion in sales for the January to March period, marking an impressive 15% increase compared to the same period last year. This surge was fueled by a remarkable acceleration in YouTube ads (up 21% YoY), Google Search (up 15% YoY), and Cloud (up 27% YoY). In fact, Google's Q1 2024 revenue surpassed analyst consensus estimates by a jaw-dropping $1 billion.
But wait, there's more! Google's profitability was off the charts. In Q1, their operating margin expanded by a whopping 700 basis points, reaching an impressive 32% (compared to 25% in the same period last year). The operating income surged to $25.5 billion, a massive 32% increase compared to Q1 2023. This incredible growth in profitability can be attributed to operating leverage, as higher revenue was met with relatively flat operating costs.
After accounting for interest and tax expenses, Google reported a net income of $23.7 billion, translating to an impressive $1.91 per share. That's a 62% increase compared to the same period last year and beat the estimated $1.64 per share predicted by analysts.
Google finished the quarter with a rock-solid balance sheet, boasting $108 billion in cash and cash equivalents and only $13.2 billion in financial long-term debt. Their quarterly free cash flow from operating activities reached a staggering $28.8 billion.
What’s next
Now, let's turn our gaze towards the future. Advertising demand is poised for a broader recovery as consumers remain resilient, and production costs are expected to decrease, giving Google more room to invest in sales and marketing. This bodes well for Google, as it is likely to grab a significant share of the incremental ad-dollar market, along with Meta Platforms.
But that's not all. Google's cloud business is also firing on all cylinders. In Q1, their revenue reached an impressive $9.6 billion, with operating earnings for the segment nearing the $1 billion mark. The Cloud business has grown to a size where it's not just about the narrative but also about making a real impact on Google's financials.
First dividends
When it comes to rewarding shareholders, Google isn't holding back. They are distributing capital at an increasing rate, supported by their generous free cash flow and a cash position that reaches the hundred-billion-dollar mark. In Q1 alone, Google repurchased around $15.7 billion worth of its common shares, an 8% increase compared to the same period last year. This suggests a yield of more than 3% on an annualized basis, considering
Google's market capitalization of $1.9 trillion. And guess what? The company recently approved a fresh $70 billion buyback program, signaling that there may be even more capital distributions on the horizon. They also announced a quarterly cash dividend of 20 cents per share, amounting to nearly $2.5 billion. Google has made it clear that they intend to continue paying dividends in the future, mirroring a trend seen among other tech giants.
Summary
Looking at Alphabet’s recent earnings report and its future prospects, we are bullish on its stock performances.
Disclaimer: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any form. Please do your own research and seek advice from a qualified financial advisor. From time to time, I have positions in all or some of the mentioned stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.