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Alphabet Inc Class A GOOGL

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Digital Ad Market Remains Healthy and Vibrant; Alphabet, Facebook, and Pinterest Are Attractive

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

We expect the economic recovery, which Morningstar forecasts to continue through 2025, will drive solid overall advertising growth in the United States. We now foresee a 12.6% increase in ad spending this year and 9.5% growth in 2022. Within this market, we project that digital advertising will grow 22.5% this year and 17.5% in 2022, continuing to take share as it provides more flexibility, does not require up-front commitments, is more quickly and easily measurable, and allows for adjustments in real time. The return of brand advertising and demand for newer digital advertising channels such as connected TVs, podcasts, and retail media will further drive strong growth in digital advertising.

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Company Profile

Business Description

Alphabet 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
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Aggressive Growth
Employees 144,056

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