Alphabet: Mixed Q4 Results Represent Start of Changes
(Preview) Company Update (GOOG US) (Buy)
Summary
Google/Alphabet Q4 2022 results were mixed, as indicated by the volatile share price, but we believe our investment case is progressing.
Advertising revenues fell in dollars but likely grew by around 2% excluding currency despite difficult macro.
Cost cuts have started and more are promised, but with slow and vague targets. A key investor is openly pushing for more cuts.
Generative AI is likely an opportunity, ChatGPT is not a threat, and YouTube Shorts is growing views despite TikTok and Reels.
With Google shares at $107.69, our reduced forecasts indicate a total return of 81% (22.6% annualized) by 2025 year-end. Buy.
Introduction
Alphabet Inc. released Q4 2022 results on Thursday (February 2) evening. Shares initially fell 5% in after-market trading yesterday (after a 7% gain during the day), and are down 1% at $107.69 as of 11:40 EST today.
We initiated our Buy rating on Alphabet in January 2021. Shares have gained just 13% since then, after a decline of 26% since the end of 2021. …