Alphabet: Q4 Showed Strong Growth Will Continue Post COVID

(Preview) Company Update (GOOG US) (Buy)

Summary

• Alphabet reported Q4 results overnight, showing strong double-digit growth even as COVID-19 faded; shares were up 9% post-market.

• Revenues grew 32% year-on-year in Q4, with all segments except Other Bets growing strong double-digits, and EBIT was up 40%.

• Google Advertising revenues have grown consistently since troughing in Q2 2020; its 2-year growth rate accelerated during 2021.

• Google Cloud revenues grew 44.6% year-on-year and 11.0% from Q3, and the business is expected to become profitable over time.

• With Class C shares at $3,005, we expect an exit price of $6,429 and a total return of 127% (21.4% annualized) by 2025 year-end. Buy.

Introduction

Alphabet Inc. stock rose 9% in aftermarket trading on Tuesday (February 1), after the company released Q4 2021 results.

We initiated our Buy rating on Alphabet in January 2021. Since then, (Class C) Alphabet stock has gained 58% in a year.

Q4 results showed Alphabet's strong growth has continued, even with a lessening of the pandemic's effect…