Google Stock Drops After Earnings - Is Google A Value Stock Now - Abbaxi Writes




Google Stock is down over 20 year-to-date and that doesn't include the nearly five percent decline. We're seeing in the shares in the after hours are We stepping in and buying the dip on google as, We head into the rest of the trading week. What is going on investors hopefully you guys are doing well out there that is right it's time to talk about google after the company reported their q1 earnings. After the bell today we'll take a look at the revenues the profits the different divisions that google operates in see some of the costs and some of the expenses that impacted profits. We'll take a look at the balance sheet cash flows everything that you need to know with google. We'll also talk about this from a traditional valuation metric surely there's going to be people jumping in the comments and saying the price to earnings. The price to sales is this the price to cash flow is this with google are these some of the lowest levels that we've seen with google is this truly starting to become a value stock, and then we're going to look at this from a technical perspective as well we've been following this channel and the length of time we covered this stock on our fang soccer recap show every Friday and we've noted for basically a year now there's been areas of support for google down here at about 2 500 per share well last week.


We sliced through that and we're seeing in the after hours we're going even lower down to close to 20 to 50 on this stock talk about. What that means from a technical perspective now google did report their q1 earnings those came in at 24.62 cents per share, that did miss expectations by a dollar fourteen now they also came in on that revenue side but they actually beat on that revenue side coming in at 68 billion dollars almost flat that was 23 year-over-year growth on that revenue side. But one thing that we want to keep in mind with google is where does wall street have this growth rate, because when we come over here and look at price to earnings price to sales price to cash flow and then we walk through these earnings. We have to factor in that wall street is valuing google not necessarily on the last 12 months but the upcoming 12 months and wall street very much accurately predicted google's revenue growth year over year in the most recent quarter.


I just told you they beat by 23 year over year on that revenue growth that's exactly, Where wall street had them pegged in fact just slightly under that now we look forward over the next year. Nearly two years even longer than that with google and we're seeing that wall street has actually slipped the valuation down on google down to kind of the mid teens, and then occasionally even all the way down to the low teens and all the way down to about 11 grower about two and a half years out on google so when you factor in your valuation with google understand that it does have a little bit to do with the results today, and over the last 12 months but for the most part investors are looking forward 12 24 36 months with google. We're seeing that wall street's pretty accurately predicting this company and wall street is starting to reign in their expectations on that year-over-year revenue growth that is certainly going to impact earnings as well.


We talked about how this company missed their eps by a dollar 14, We see here with wall street earnings growth is basically gonna shrivel up for the rest of the year you're essentially gonna have close to break even or just kind of low single digit revenue growth over at google for the next year. On the earnings side now it is projected to pick up a year from now with google but who knows if those predictions will turn out to be true or not those are certainly things that are weighing on google shares now let's jump into the numbers, before We get to more of the valuation stuff let's jump into these numbers over at google talk about how they had 68 billion dollars worth of revenue. Here's kind of the high-end look at it on that google search essentially the core product nearly two-thirds of revenue coming in just on that google search 39.6 billion dollars last year on a quarterly basis you were sitting closer to 31.9 you have YouTube.


 Where most of you are watching this right now you went from six billion dollars worth of revenue up to about 6.8 that appears like it's slowed down in terms of its growth rate into previous quarters. You also have google network which is essentially kind of the network of sites that show adsense and things like that accelerated actually pretty nice from 6.8 up to 8.1. So your total google advertising business year over year grew by about 10 billion dollars you went from 44.6 up to about 54.6 you do have some other revenues. Over at google but they're rather consequential you come down to the other key business that a lot of investors look at is this google cloud again really solid revenue growth year.


Over year you went from 4 billion up to 5.8 billion, 'But i'll show you in a minute these segments don't make any money. So we come down here to operating income which is essentially kind of the income you generate off of these business. We've got google services which is all your advertising businesses and your online stuff off of 61.4 billion dollars worth of revenue you have nearly 23 billion dollars.


Worth of operating income you see here on google cloud what I notice is despite the strong revenue growth again you went from 4 billion up to 5.8 billion notice. What happened to our operating results they essentially stayed flat, So you lost 974 million last year on a quarterly basis and this year you lost 931 million despite adding 1.8 billion dollars worth of revenue to that business model. Is showing me that there's still a little ways from profitability on that google cloud and then obviously you have other bets as well that lost 1.1 billion dollars off just 440 million dollars worth of revenue. Now when we come over to the financials they paint an absolutely glorious picture quite frankly basically across the board over at google you've got over 130 billion dollars worth of cash that's down.


A little bit year over year or essentially from the beginning of the years when this balance sheet starts, So about three months end we're down a couple billion dollars so we'll show you where that went here in a moment. I'm sure most of you can guess come down here to long-term debt basically flat year-over-year on that but just 14.8 billion and you have 133 billion dollars in cash from a balance sheet perspective quite frankly. It doesn't really get anything better than with alphabet now the other thing that you have to keep in mind with these. I mean 133 billion dollars will show you the positive cash flow that google has in a minute yes, We talked about how they have a 70 billion dollars yes a 70 billion dollar buyback on this company as well certainly that's where a lot of this cash is gonna go but even if you minus off 70 billion dollars you still have a lot of money.


I mean they could have bought twitter they could have bought a lot of different things if there was a regulatory environment there that allows google to do that obviously. We don't have that here in the United States and it's not president Joe Biden's fault if there were republicans in office they probably wouldn't be letting google buy whatever companies they want either it's more the philosophy of Washington right now, to not allow quote unquote big tech to get any bigger through acquisitions so they're going to have to do. Some creative stuff with this cache, We'll talk about maybe later on the show some things that they could potentially do now we come down here to the statement of income we talked about how they had that 68 billion dollars worth of cash again that's YouTube.


That's the other bets that's all the advertising stuff and that's also their cloud business has 68 billion dollars worth of revenue they were sitting at 55 billion in the previous year. You see here on the total cost and expenses you went from 38.8 up to about, We'll call it 48. So they added about 10 billion dollars to their cost year over year slightly under that and they added a little over 13 billion dollars to that top line of revenue. Now some things change though after you get underneath their income from operations so your income from operations which is typically the line. We really focus on here on the investor channel so you've got your revenue you've got your all your cost to run google. So in the most recent quarter you had 68 billion worth of revenue you had 47.9 billion dollars worth of cost you come down here to income from operations sitting right at 20 billion dollars.