Alphabet Inc. (GOOGL) is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Its other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue.
GOOGL reported strong second quarter results due to solid momentum across its search, advertising, cloud and YouTube businesses. The company is benefiting from an increasing number of consumer online activities and rising advertiser spending. Its cloud division continues to be a key growth driver.
The company has a whopping $135.9 billion in cash as of the end of the most recent quarter, which greatly outweighs its long-term debt of $25.9 billion. This has led to a Quality Grade of B in our POWR Ratings system.
Earnings have risen an average of 29% per year over the past five years and were up 102.8% over the past year. Analysts forecast earnings to rise 72.5% in the current year. GOOGL’s stock appears a bit overvalued with a forward P/E of 30.86. The stock has shown bullish momentum since October as shown in the chart below.
Take a look at the 1-year chart of GOOGL below with my added notations:
Over the past year, GOOGL has been trending higher, while also forming a nice trend line of support (green) along the way. Any (2) points can start a trend line, but it’s the 3rd test and beyond that confirms its relevance.
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GOOGL has formed a trend line of support. A short position could be entered in GOOGL if the trendline of support is broken.
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GOOGL shares fell $0.60 (-0.02%) in premarket trading Friday. Year-to-date, GOOGL has gained 54.80%, versus a 18.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing.
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