Alphabet (NASDAQ: GOOG) is scheduled to report its fiscal Q4 2023 results on Tuesday, January 30, 2024. We expect revenues to remain just below (in line) expectations, while earnings are likely to miss consensus. The company beat Street expectations last quarter, with the top line increasing 11% to $76.7 billion. The growth was due to higher revenues in Google Search, Google Cloud, and Google Other segments. We expect revenues to see year-over-year growth in Q4. Our interactive dashboard analysis works Alphabet (GOOG) Revenue Preview. has more details.
Amid the current financial backdrop, GOOG stock has seen extremely strong gains of 65% from levels of $90 in early January 2021 to around $150 now, versus an increase of around 30% for the S&P 500 over this roughly 3-year period. However, the rise of GOOG stock has been far from consistent. Returns for the stock were 65% in 2021, -39% in 2022, and 59% in 2023. By comparison, returns for the S&P 500 were 27% in 2021, -19% in 2022, and 24% in 2023 – indicating. that GOOG underperformed the S&P in 2022. In fact, consistently beating the S&P 500 – in good times and bad – it’s been tough over the past few years for individual stocks; for other heavyweights in the Communications Services sector including META, NFLX and TMUS, and even for the mega-cap stars TSLA, MSFT and AMZN. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 every year during the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less roller coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and high interest rates, could GOOG face a similar situation as it did in 2022 and underperforms the S&P over the next 12 months – or will it see a sharp jump?
Our forecast indicates that Alphabet Rating (GOOG). is $148 per share, which is 1% below the current market price of about $150.
(1) Revenues just miss (in line) the estimates
Alphabet (GOOG) earnings. grew 7% indeed to $221.1 billion in the first three quarters of FY2023.
- Google search and other segment contributes close to 60% of the total revenues. It witnessed slower growth (more than 6% yoy) during the same period due to a difficult macroeconomic scenario. We expect the same trend to continue in Q4.
- Google Cloud and Google Other revenues increased by 26% and 18% respectively. We expect Q4 results to be on similar lines.
- Overall, we forecast Alphabet’s revenues to touch $306.1 billion in FY 2023.
Trefis estimates Alphabet’s Q4 2023 net income to be around $84.96 billion, just below (in line) the $85.23 billion consensus estimate.
(2) EPS to marginally miss the consensus
Alphabet’s Q4 2023 adjusted earnings per share (EPS) is expected to be $1.56 per Trefis analysis, 2% below the consensus estimate of $1.59. Adjusted net income improved 15% indeed to $53.1 billion in the first nine months of FY 2023. Further, the figure jumped 42% indeed in Q3 due to lower total expenses as a percentage of revenues. We expect Q4 results to follow the same trend. Overall, Alphabet is likely to report annual GAAP EPS of $5.72 for the full year 2023.
(3) Share price estimate is 1% less than the current market price
We arrive at Alphabet Rating (GOOG).using an EPS estimate of around $5.72 and a P/E multiple of just under 26x in fiscal 2023. This translates to a price of $148, which is 1% below the current market price.
Note: P/E Multiples are based on year-end Share Price and reported (or expected) Adjusted Earnings for the full year.
returns | Jan 2024 MTD (1) |
From the beginning from 2023 (1) |
2017-24 Total (2) |
GOOG Return | 7% | 69% | 290% |
S&P 500 Return | 2% | 27% | 118% |
Hit Enhanced Value Portfolio | 0% | 38% | 609% |
(1) Returns effective 1/25/2024
(2) Cumulative total profit since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.