Google Stock Is a Better Deal Than It Looks

Dwayne Harmon
February 6, 2019

Revenue-wise, Alphabet is still an advertising company, despite its investment in cloud and other business. That was the same growth rate as reported for last year's fourth quarter, which worries some analysts.

"With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers and partners around the globe", said Ruth Porat, Alphabet's CFO, in the same February 4th media release.

Alphabet Inc's fourth-quarter revenue and profit beat Wall Street's expectations on Monday but sharply higher spending, as it added data centers, cloud engineers and marketed its services heavily during the holidays, anxious investors.

Alphabet's fourth quarter revenue rose 22 percent from a year ago to $39.28 billion, compared to the average expectation of $38.93 billion among analysts tracked by Refinitiv.

The Google name is displayed outside the company's office in London, Britain. Advertising directors speaking to CNBC have said some brands were moving 50 to 60 percent of their ad spending from Google to Amazon. The company is spending some of that on buying back an additional $12.5 billion of its Class C shares.

Higher traffic acquisition (TAC) costs are also a potentially damaging factor, but as a percentage of total revenue, the 23% figure is actually lower than in the fourth quarter of 2017.

He's expecting ad revenue from mobile search, YouTube and Google's programmatic advertising services to drive growth in the fourth quarter. To date, Google has mostly faced fines in Europe that it has been able to pay with its massive cash hoard, but some privacy advocates and those concerned with the company's sheer size are pushing for harsher policies. And it would be short-sighted to count Google out, though Amazon and Microsoft's businesses are larger.

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The rise of the Faangs helped propel stock markets to new highs and their stumble helped to drag down indices across the world past year.

On Monday Apple briefly became the world's most valuable company once again as investors continued to absorb its better than expected results from last week.

He's happy Google is spending heavily on YouTube, cloud and hardware.

Google CEO Sundar Pichai didn't share any concrete sales numbers, but told investors during the company's earnings call on Monday afternoon that it had sold "millions" of devices during the quarter.

Other businesses, such as health venture Verily and self-driving start-up Waymo, were more disappointing at $154 million in revenue. Operating losses were $1.33 billion.

Alphabet is expected to report its most recent quarterly results Monday afternoon.

Expenses rose to $31 billion compared with $24.6 billion in the same period a year ago.

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