Alphabet beats estimates in Q3: ‘the stock is still cheap’

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Oct 26, 2021
  • Alphabet handily beats Wall Street estimates in its fiscal third quarter.
  • Jefferies Thill explains why shares slipped despite strong results.
  • CFO Porat says impact of Apple's privacy changes was only "modest".

Alphabet Inc (NASDAQ: GOOGL) handily topped Wall Street estimates in its fiscal third quarter, discrediting concerns that Apple’s privacy changes will hit Google too, the way it did Facebook and Snap.

Why are shares down in extended trading

Explaining why Alphabet shares tanked about 2.0% in extended trading despite strong results, Jefferies’ Brent Thill said on CNBC’s “Closing Report”:

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59% year-to-date run, a huge move. YouTube was a little bit lighter than most people thought, but overall good numbers. Stock is still cheap at a mid-teen EBITDA. We still like it long term, but a number of these names have had big moves, they need to digest these gains.

Thill rates GOOGL at “buy” with a price target of $3,325 that represents a close to 30% gain from where the stock closed on Tuesday.

Q3 financial results

Alphabet reported $18.94 billion in net income that translates to $27.99 per share. In the same quarter last year, its net income was capped at $11.25 billion or $16.40 per share, as per the earnings press release.

The American multinational generated $53.62 billion in revenue versus the year-ago figure of $37.97 billion. The stated revenue excludes $11.5 billion in costs related to traffic acquisition. According to FactSet, experts had forecast $23.73 of per-share earnings on $52.3 billion in revenue (ex-TAC).  

Impact of Apple’s privacy changes

According to CFO Ruth Porat, the impact of Apple’s privacy changes on YouTube’s revenue was only “modest” in the third quarter.

Google’s total revenue from advertising printed at $53.1 billion (43% higher than last year), of which $37.9 billion came from “Search” and $7.2 billion from YouTube sales, both significantly ahead of last year’s figures.

Alphabet said its operating margin stood at 32% in Q3 – a sharp increase from last year’s 24%. At $5.0 billion, Cloud revenue jumped 47% in the recent quarter.

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