Reports Q4 2021 results on Tuesday, February 1, after market close
Income forecast: $72.23 billion
EPS forecast: $27.80
Investors in Google parent company Alphabet (NASDAQ:) have little to complain about. The pandemic-driven shift to online shopping provided a huge boost to the company's revenues and drove its stock to the top-performing group with a market cap of one trillion dollars.
That strength is likely to be seen again today when the search engine giant reports its latest quarterly earnings after the market close. Analysts predict an average year-over-year growth of 20% to 25% in both profit and revenue.
The revival of the advertising industry in 2021 was so powerful that Alphabet in the . Those numbers propelled global ad spend to a 26% increase in 2021, up from previous projections of 15%, according to GroupM, a media buying firm.
Further, unlike Meta Platforms (NASDAQ:) and Snap (NYSE:), Google's ad sales were little affected by the most recent privacy changes in Apple's (NASDAQ:) iOS, primarily because the company relies on its Android operating system.
This distinct lead in the digital advertising market is also helping the California-based company's stock withstand the current bearish period in markets much better than other technology stocks. Google stock closed at $2,706.07 Monday, down about 6.4% this year. In that period it has fallen by about 9%.
Google was the best performing stock in 2021 of the five megatech stocks including Apple and Amazon (NASDAQ:), as it rose 65%.
Buy Rating
This growth momentum is likely to slow down somewhat this year, after sales are expected to grow by 40% in 2021, the biggest growth since 2007. should be seen as a buying opportunity for long-term investors.
First, Google stocks have a lower valuation and higher growth rate than most mega-cap peers. Alphabet trades about 24 times future profits, making it cheaper than Amazon and Microsoft (NASDAQ:). That may be why Google stock received a buy recommendation from 45 of the 48 analysts surveyed by Investing.com. The average 12-month price target for the stock is $3,272.28, suggesting a 20.9% return from the current share price.
GOOGL Consensus Estimates
Source: investing.com
RBC Capital Markets analyst Brad Erickson said in a Bloomberg report that arguments can be made about whether the stock's multiplicity is already sufficient optimism. Still, there are good reasons to stay positive.
Erickson added:
"Given the particularly attractive COVID rebound exposure, the increasing engagement and monetization on YouTube and Google Cloud Platform's rise to profitability, we see solid reasons to own the name."
In a recent note, Credit Suisse also reiterated that Alphabet is outperforming given the stock's upside potential, driven by its advertising business, YouTube, and advancements in its cloud computing unit.
The note read:
"We maintain our outperform rating based on the following: 1) continued improvements to search ad monetization through product/AI-driven updates, 2) greater than expected revenue contribution from non-search companies. "
Bottom Line
Even after achieving remarkable returns in 2021, Alphabet remains in a fast-growing mode, aided by strong momentum in its ad and non-ad businesses . Today's earnings report will likely reflect that optimism.
