Alphabet, the parent company of Google, exceeded expectations in its Q2 earnings report, with revenue up 14% and earnings spiking 31%. Despite this strong performance, the stock price fell 4% on Wednesday, raising the question: Is Alphabet stock a buy?
Key Highlights of Alphabet’s Q2 Earnings:
- Revenue climbed 14% to $84.7 billion, surpassing estimates
- Net income rose 28% to $23.6 billion
- Earnings per share increased 31% to $1.89, beating estimates
Factors Behind the Stock Price Decline:
One of the factors that may have contributed to the stock price decline is the performance of YouTube ad sales, which were up 13% but fell short of revenue estimates. Additionally, advertising on the Google network decreased by 5% year-over-year to $7.4 billion.
However, the cloud business had a stellar quarter, generating over $10 billion in revenue for the first time. Google Search revenue also saw a healthy increase of 11% to $73.9 billion.
High Valuations and Market Correction Concerns:
The broader market decline on Wednesday, led by Tesla’s disappointing earnings, may have impacted tech stocks like Alphabet. Concerns about high valuations in the market, with some experts predicting a correction, could also be a contributing factor.
Alphabet, with a P/E ratio of 26 and a forward P/E of 24, is not considered overvalued compared to other tech stocks. This recent selloff could present a buying opportunity for investors, with a median price target of $200 for Alphabet stock.
Analysis and Conclusion:
Despite Alphabet’s strong Q2 performance, the stock price decline on Wednesday was influenced by broader market factors and concerns about high valuations. While the company’s fundamentals remain solid, market corrections can present buying opportunities for savvy investors.
Overall, Alphabet stock appears to be a buy, especially for investors looking for a growth opportunity with a relatively lower valuation compared to other tech stocks.