Alphabet Inc: The devil is in the details

“On Monday, we received the fourth-quarter results from Alphabet. The headline numbers showed big beats, sending the stock to a valuation higher than that of Apple,” Bill Maurer writes for Seeking Alpha. “While Wall Street rushed to raise its price targets higher and higher, most seemed to ignore some key problems with this report.”

MacDailyNews Take: As far as most sell-side analysts go, the only thing that really matters is commission-generating churn.

“Everyone loved the big beat on the bottom line, with the company reporting non-GAAP EPS of $8.67 versus a Street estimate of $8.10. However, the company received a big benefit from a one-time item,” Maurer writes. “For Q4, Alphabet had an effective tax rate of 5%. For all those who criticize Apple for its tax situation, Alphabet should receive some flak. For the quarter, the company had GAAP net income growth of just 5%, and that included the tremendous tax benefit. Had the tax rate been equal to the year-ago period, Alphabet would have likely reported at least a $400 million decline in net income.

“As I write this article, Alphabet is trading at about 23 times expected non-GAAP EPS for this year. If you shift that valuation to GAAP, you are around 28 times,” Maurer writes. “Apple trades for just 10.5 times earnings, with a number of other large tech giants trading in the teens.”

“In the end, Alphabet’s quarter was not as impressive as the headline results suggest,” Maurer writes. “A big tax break fueled the bottom line beat, likely hiding a drop in quarterly GAAP net income. Over the next couple of years, Alphabet will need to keep spending in check to avoid a big drop in net profit margins.”

Read more in the full article here.

MacDailyNews Take: Welcome to the market value mountain top, Alphabet. Let’s see how long you can manage to stay there.

SEE ALSO:
Alphabet Inc. surpasses Apple, now the world’s most valuable company – February 1, 2016

18 Comments

  1. And where are the WS analysts? Aren’t they supposed to be able to figure this fairly simple stuff out for themselves? Geez, Louise. Non-GAAP results??? Don’t they know what GAAP is? Generally Accepted Accounting Principles. The analysts should never let any company get a ride on non-GAAP results.

    1. “The analysts should never let any company get a ride on non-GAAP results.”
      Can’t say that loud enough. In particular when the “non-” in non-GAAP only means to ignore a very large part of your expenses, like the stock based compensation in case of Analphabet.

    2. And Katy Huberty recently recommended Google as a buy. Go figure.

      She is also the first person I remember whose “supply checks” showed Apple’s future was so beleaguered, … the company was doomed!

      What’s that tell ya about Wall Street?

      ha ha ha.

  2. Exactly MDN, Fruggle rises to the top of the heap – yet with Slamdung fading fast on Andybot sales and market share, one has to ask, what does Fruggle honestly have to offer. KissmyGlass project is dead, iClones aint selling, DomeRash maybe is doing okay. But without Ad clicks, Fruggle has zippy-do-da. So happy, snApple has real product and true innovation. That’s what will keep them in their steady climb. Fruggle is merely a flavour of the month for a while. Nothing to fear.

  3. Let me tell you how the WS analyst works.
    A wealthy client pays millions those so called analyst to make a recommendation of which stock to buy and which to drop.
    So the information that a big bucks client receive is not the same the public receives, be logic, they are not going to give that valued information for free.
    Apple was on the top because it is extremely very hard to lower the stock price of a company with no debt, billions on cash and making more and more profits every time, so apple was in the top all by itself, with no help.
    Google on the other hand, has always receive the help of the WS analyst who always spoke well of google (now alphabet) but it is extremely hard to make a stock rise for a company who has spend Billions on failed companies (like motorola).
    So at the end, in you are an investor who doesn’t pay an analyst for the recommendations, be careful of the recommendations they make public because they are meant to keep you aways form the good ones.

    Watch the “Inside Job” movie so you can have a better understanding of the situation. https://www.youtube.com/watch?v=FzrBurlJUNk

    1. Investors who are due diligent would invest in a company generates with lots of revenues and profits and hoarding mountain of cash, and also debt free, which indicate that company is doing great. Its products in consumer hands all over the world to the other small corners of the globe.

  4. AAPL has surpassed GOOG now, right now its 525-510 billion for AAPL which is up 1%, GOOG is down 3%

    AAPL should be 150-200 billion more worth than GOOG in Wall Street, anything else is just plain twisted and f*cked up sh*t

  5. Wall Street is so full of shit it’s coming out my ears. The Aloha et reign lasted 2 days? The “beat the street” bullshit was a quick get rich scheme and lots of clever people made lots of money while the sheeple bought like crazy. They are back down to below pre-announcement levels. Will that change? Yes. When the REAL investors finger out the not-so-transparent not-so-great results from the Aloha et casino, they will be back at FB and Apple.

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