Good morning investors!

Every Thursday we release our latest “Deep Dive” — a high level, easy to follow stock analysis designed to give our Edge+ members an EDGE when it comes to properly valuing a company. We do the heavy lifting so you can make more sound investing decisions.

Today’s deep dive target is Alphabet — the world’s second largest technology company by revenue.

In today’s article we will look at the company’s performance, recent results, and dive deeper into its valuation to determine whether the stock is a BUY, SELL, or HOLD as we begin 2024, based on our opinion alone.

Before we share our research, what are your thoughts on Alphabet?

Alright, grab your coffee and let’s dive in.

Edge Score

We have been diligently working behind the scenes to develop several stock analysis systems for our members. Recently we unveiled our first tool — The Edge Scoring System.

The system takes tons of data and provides a score for 5 different metrics:

• Valuation

• Future Growth Projections

• Past Performance

• Financial Health

• Dividend

The system then takes these five metrics and provides an overall rating for the stock, which we refer to as the Edge Score.

Here is our Edge Score for Alphabet:

Below, we will further break down each category and share our methodology for scoring for this company.

Company Background

Alphabet Inc. is a major American multinational technology conglomerate based in Mountain View, California. Formed on October 2, 2015, through a restructuring of Google, Alphabet serves as the parent company to Google and various former Google subsidiaries.

The company is recognized as one of the Big Five American information technology firms, alongside Amazon, Apple, Meta (formerly Facebook), and Microsoft. The creation of Alphabet aimed to streamline and enhance accountability within Google's core business, while providing more autonomy to its diverse range of subsidiaries.

Sundar Pichai is a co-founder and the current CEO of Alphabet.

Source of Revenue

Alphabet is a holding company, which engages in software, health care, transportation, and other technologies. It operates through the following segments:

• Google Services

• Google Cloud

• Other Bets

The Google Services segment includes the two largest search engines in the world which is Google Search as well as YouTube. It also includes other products and services such as, Android, Chrome, hardware, Gmail, Google Drive, Google Maps, Google Photos, and Google Play.

The Google Cloud segment offers infrastructure, cybersecurity, data, analytics, AI, and machine learning, and other services; Google Workspace that include cloud-based collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar, and Meet; and other services for enterprise customers.

The Other Bets segment sells health technology and internet services.

Past Performance

In this section we will go over the company’s recent earnings results and dive into their financial performance over the last few years.

Stock Price History

Alphabet shares have risen 479% over the last 10 years .

Recent Earnings Report

In its recent quarterly report, Alphabet exceeded earnings and revenue estimates, although YouTube ad revenue fell short.

Alphabet reported a net income of $23.6 billion, or $1.89 per share, a 29% increase from last year. Revenue was $84.74 billion, surpassing the $84.21 billion estimate and marking a 14% year-over-year rise.

The revenue growth was driven by search and cloud services, with cloud revenue exceeding $10 billion and achieving $1 billion in operating profit for the first time.

Ad revenue grew to $64.62 billion, up from $58.14 billion last year, indicating recovery in Google's advertising business. YouTube ad revenue increased to $8.66 billion from $7.66 billion but missed estimates, as the platform faces competition from social video sites like TikTok.

The "Other Bets" unit, including Waymo, generated $365 million, up from $285 million a year ago.

Alphabet did not provide future guidance.

GOOG shares are -11.9% since reporting earnings on July 23rd.

Income Statement

Despite being a $2 trillion company, Alphabet continues to show significant growth year after year. Over the last 3 years, Alphabet has grown its revenue by 49%, its operating income by 61% and its net income by 39%. It has also continued to grow its margins over that time.

Future projections also indicate strong growth going forward.

The company is a powerhouse when it comes to revenue and profit and we continue to be encouraged by its consistency.

Thank you for joining us for this Deep Dive of Alphabet.

If you enjoyed this deep dive, be sure to LEAVE A COMMENT. We look forward to hearing your thoughts on Alphabet and our analysis. And let us know what stocks you want to see in the future.

Thank you, and until next time investors!

Mark & Chris

The Investor’s Edge

Disclosure

This deep dive is for educational and informational purposes only. The authors are NOT financial advisors, thus cannot recommend for you to personally to buy or sell any positions. Positions taken on a particular stock are opinions of the authors and only the authors. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.