Alphabet: 34% Revenue Growth & EBIT Doubling In Q1 2021 (Preview)

Company Update (GOOG US) (Buy)

Summary

• Alphabet Q1 2021 results showed year-on-year revenue growth of 30-50% across its businesses and a doubling of its EBIT.

• Strong ad revenue growth was driven by a general rebound in ad spend, continuing shift of ad spend online and product innovations.

• Google Cloud revenues also grew 47% year-on-year; natural operational leverage meant an 8 ppt jump in Google Services' EBIT margin.

• We now expect Alphabet's Net Income to grow 40% in 2021 and to continue growing at low-teens annually thereafter.

• With shares at $2,412, we expect an exit price of $4,318 and a total return of 92% (17.4% annualized) by 2024 year-end. Buy.

Why is Alphabet Stock Up?

Alphabet released its Q1 2021 results after markets closed on Tuesday (April 27). The results sent Alphabet shares up 4.6% in aftermarket trading.

We originally initiated a Buy rating on Alphabet stock in January 2021. Since then shares have risen 27.0%. (We have also had a Buy rating on Facebook (FB), Alphabet's key competitor, since March 2019.)

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