Bulls Look to Alphabet Results to Keep Tech Stock Rally Going


Alphabet, parent company of Google, announced their earnings today, and despite beating analyst expectations on most metrics saw its share price fall more than 2% in after-hours trading. The "other bets" businesses had an operating loss of $3.4 billion in 2018, or about $4 per share.

Revenue breakdown: Google Properties, $27.02B (consensus: $26.75B); Google Network Members' Properties, $5.6B (consensus: $5.56B); Google Other, $6.5B (consensus: $6.43B); Other Bets, $154M (consensus: $187.4M).

Google business revenue was $136.2bn, up from $110.4bn a year ago. Facebook results beat Wall Street estimates last week.

The company's profitability remained robust as its operating income rose 21 percent to 8.2 billion dollars over the previous quarter.

Alphabet has about the same price/earnings ratio as Facebook (FB), but its margins are half of Facebook's, an indication of the potential margin upside if it reined in spending. Revenue of $6.5 billion in the quarter represented a 31 percent increase year-over-year. His note was titled "Hey Google, Can You Stabliize Margins?"

Revenue from Alphabet Inc.'s largest source of income, Google's advertising division, bumped its figures by 19.86-percent to land at $32.635 billion for the three month period. Jefferies analyst Brent Thill said a new share buyback plan of as much as $15 billion is possible. Porat said headcount growth should moderate in 2019.

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Google grew headcount to 98,771 at the end of the year, up from 80,110, with most of the growth coming in engineers and product mangers, and most of that in cloud.

Alphabet's report follows a big earnings week from industry heavyweights such as Apple Inc. The company bought back $9.1 billion of stock in 2018, less than its $9.4 billion of stock-based compensation. Among the more damaging of those was its work on a China-specific search engine which ultimately caused questions to be raised by the U.S. government.

The yearly numbers looked positive as well - revenue grew from $110.85 billion to $136.81 billion or about 23%.

"While the core business is still growing impressively, the significant spending shows growth isn't quite as capital-light as had been hoped", said George Salmon, a stock analyst at financial firm Hargreaves Lansdown. Amazon has a much higher valuation that Alphabet, trading for about 60 times current-year estimated profits.

If I'm Googling "noise-cancelling headphones", odds are good I'm about to spend some money on headphones, and a company can place an ad right next to my search results. Page is one of the few CEOs of major companies who doesn't take part in quarterly conference calls.

It's tough to know what they are thinking because they rarely talk publicly.