The Café de la Bourse has put Google’s holding company, Alphabet, under the microscope. We looked at the mission and ambitions of Google’s parent company, the details of its businesses, as well as its financial and stock market performance. We also looked at the technical setup of the Alphabet share price to better prepare for a possible investment. Find our analysis and our opinion on the Alphabet share.
Alphabet: mission and ambition of the holding company that owns Google
Alphabet is a holding company of an American multinational technology conglomerate headquartered in Mountain View, California. It was created following a Google restructuring on October 2, 2015 and became the parent company of Google. Alphabet is the third largest technology company in the world by revenue and one of the most valuable companies on the international equity markets. It is one of the Big Five American information technology companies togetherAmazonfromApplefrom Half and of Microsoft which are called i GAFAM.
The creation of Alphabet was motivated by the desire to make Google’s core business “cleaner and more responsible” (in the words of its founders Larry Page and Sergey Brin), while guaranteeing greater autonomy to the companies of the group that carry out activities other than services. Internet . The company is called Alphabet in reference to the collection of letters representing language, one of humanity’s most important innovations.
Alphabet owns several companies:
- Calico (Health),
- Capital G (Private Equity),
- Deep Mind (Artificial intelligence),
- GV (venture capital),
- Intrinsic (robotics software),
- Isomorphic Labs (medical research),
- Truly (health),
- Waymo (autonomous driving),
- Ala (delivery by drone),
- Development X (various technologies)
- and of course the most famous of them: Google!
Google’s mission is to organize the world’s information and make it universally accessible and useful. Every time a search is performed, thousands, if not millions, of web pages or other content are likely to be matched. It is Google’s job to present the most useful information in response to each request made. Google’s search index is the largest content library in the world. It is made up of web pages, images, books, videos, and more.
What is Alphabet’s current strategy?
Alphabet relies on several main axes to guide its strategy: on the one hand, the diversification of its activities and the regular introduction of new products and services and, on the other, business acquisitions.
Beginning with the search engine business in 1998, the company’s product portfolio has been significantly expanded. Today, Alphabet offers the widest range of technology products and services across its many portfolio companies.
Alphabet’s business strategy calls for rapid growth through acquisitions. From its inception until 2022, Alphabet acquired over 240 companies. The internet giant’s ability to effectively incorporate its corporate culture into the new companies it acquires is one of Alphabet’s biggest competitive advantages.
Finally, Alphabet maximizes its profits by creating a closed ecosystem. Google has created a collection of interconnected services and applications. Customers typically access this ecosystem using the Chrome browser, watching YouTube videos, or using Gmail. At no time, they are invited to use additional services such as Drive, Play, Calendar and others. The wider the range of products a customer uses, the more Google earns through advertising in different formats.
Additionally, machine learning and artificial intelligence (AI) have been at the heart of the company’s efforts for several years and have a direct impact on Alphabet’s business strategy. The introduction of the Google Assistant and its integration into a new family of hardware devices like the Pixel and Google Home in 2016 is a big step for the company towards improving machine learning and artificial intelligence.
Google: Alphabet’s strengths and weaknesses
Alphabet business overview
Alphabet is a collection of various companies that mainly specialize in Internet services and software.
Today Alphabet is an Internet giant that dominates the markets for mobile operating systems (Android), browsers (Chrome), search (Google Search) and online advertising (Google Ads). Each of Google’s major products, such as Android, Chrome, Gmail, Google Maps, Google Play, Search, and YouTube, have over 1 billion monthly active users.
The Company’s business is divided into three main segments: Google Services (Android, Chrome, Hardware, Google Maps, Google Play, Search, YouTube), Google Cloud (Google Cloud Platforms and Google Workspace) and Other Bets. Google Services generates 92.4% of revenue while Google Cloud generates 7.2%
Google essentially generates revenue by providing performance advertising (clicks or other actions) and brand advertising (simply displaying ads). The company’s most important product is its search engine, or more precisely, the combination of a search engine and search advertising.
Google Cloud Platform (GCP), offered by Google, is a suite of cloud computing services that runs on the same infrastructure used internally by Google. GCP provides a number of services such as servers, turnkey data storage and analytics systems, and machine learning services.
Other Bets or “Moonshots” is a portfolio of promising new companies that are set to change the face of the industry they operate in or dominate the new emerging sectors. These businesses include healthcare, capital investments, internet services, and other businesses. Currently, machine learning and AI development are at the heart of Alphabet’s efforts.
Alphabet’s net revenues are divided geographically as follows: United States (45.8%), Americas (5.6%), Europe / Middle East / Africa (30.7%) and Asia / Pacific (17.9%) .
Fundamental analysis of the alphabet
Alphabet’s earnings in the second quarter of 2022
Alphabet’s revenue and earnings grew in the second quarter of 2022, but remained below analysts’ expectations. Alphabet shares have lost more than a quarter of their value since the start of 2022.
Following the release of Q2 2022 earnings, Sundar Pichai, CEO of Alphabet and Google, said: In the second quarter, our performance was driven by research and the cloud. The investments we have made over the years in AI and IT help make our services particularly valuable to consumers and highly effective for businesses of all sizes. We will continue to invest responsibly in AI “.
Revenue of $ 69.69 billion
Alphabet’s second quarter revenue was $ 69.69 billion, slightly below analysts’ expectations of $ 69.9 billion. Revenue growth in the June quarter was 13%, up from 62% the previous year. Ad revenue was $ 7.34 billion in the second quarter, while the market was hoping for $ 7.52 billion.
Google Cloud revenue, which grew 35.6% year-over-year (the slowest growth in several years), was lower than analysts’ expectations for the quarter.
Alphabet’s profit remains stable
Alphabet reported a marginal increase of 0.4% in earnings from $ 19.36 billion in the second quarter of the previous year to $ 19.45 billion in the second quarter of the following year. the earnings per share (EPS) from Alphabet reached $ 1.21, while the market estimate was $ 1.28.
Google’s parent company did not provide financial forecasts for the rest of the year.
Technical analysis of the alphabet
Graphical analysis of the Alphabet share price
Source: Tradingview, indicative data
Technical analysis of alphabet actions
Over the past 12 months, thebuffer stock Alphabet fell 27.7%. After several years of stock market euphoria, the Google holding is affected by the inflationary macroeconomic context and the rise in interest rates, which affects technology companies in particular.
Since the beginning of the year, Alphabet stock has been in a downtrend channel (grayed out on the chart). In the short term, the trend is quite negative with Alphabet’s share price below its own moving average at 30 days (in yellow in the graph). The MACD it is negative and above its signal line. On the other hand, the Stochastic RSI is in the overbought zone, suggesting a potential technical correction in the coming days.
Our opinion on the Alphabet odds
Given the slowdown in Alphabet’s revenue growth, some investors have rushed to take profits to secure the accumulated gains from the rise in Alphabet’s share price in recent years. However, it is prudent to look at areas where Alphabet may be experiencing levels of stagnation, or even decreasing, and those that are doing well and with a lot of room for maneuver.
The cloud is one of them and it has good momentum for steady growth. This year the sector has been affected by inflation and falling demand, but these economic difficulties will not last forever and this business is expected to generate significant growth for Alphabet. For investors looking to take a long-term position in Alphabet shares, it will be important to keep an eye on upcoming publications from Google’s parent company.
Turbo Exchange alphabet
To trade Alphabet shares, approach yours stockbroker. For example, you can choose to use a derivative of the type Turbo call o Turbo put to take advantage of the bullish and bearish fluctuations of Alphabet shares.
Image source: Freepik
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