Alphabet: Q2 Double-Digit Revenue Growth Confirms Resilience

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

Summary

• Alphabet shares rose 5% after Q2 results on Tuesday evening, but remain 27% below their peak and at a 17.7x P/E.

• Revenues grew by 16% in local currencies in Q2, after growing 57% last year, demonstrating Alphabet's resilience in an uncertain world.

• EBIT was flattish in Q2 as expenses grew with a 21% expansion in headcount, but management has now slowed hiring.

• With ad revenues now 73% higher than in 2019, the long-term trend is clear. There may be near-term headwinds, but manageable.

• With shares at $110.50, we expect an exit price of $293 and a total return of 165% (31.2% annualized) by 2025 year-end. Buy.

Introduction

Alphabet Inc. reported Q2 2022 results after markets closed on Tuesday (July 26). Shares rose 5% in after-market trading, but remain 27% below their 52-week high and just 8% above their 52-week low.

We initiated our Buy rating on Alphabet in January 2021. Despite their 23.6% year-to-date decline, Alphabet shares are currently up 16.4% since our initiation.

Q2 results sup…