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Alphabet's Q1 Softness in YouTube Is Temporary; Cloud Growth Remains Healthy; Shares Undervalued

Senior Equity Analyst Ali Mogharabi

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi | Apr 27, 2022

Alphabet reported mixed first-quarter results, with revenue coming in slightly below FactSet consensus estimates while operating margin and income came in above expectations. We are maintaining our $3,600 fair value estimate for wide-moat Alphabet and view the stock as attractive.

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Alphabet Inc Class C's Company Profile

Business Description

Alphabet Inc is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google's other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue. Alphabet's moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet's operating margin has been 25%-30%, with Google at 30% and other bets operating at a loss.

Contact

1600 Amphitheatre Parkway
Mountain View, CA, 94043

T +1 650 253-0000

investor-relations@abc.xyz

Sector Communication Services

Industry Internet Content & Information

Most Recent Earnings Mar 31, 2022

Fiscal Year End Dec 31, 2022

Stock Type Aggressive Growth

Employees 163,906

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