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Alphabet Inc Class C GOOG

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Alphabet’s Google Advertising and Cloud Performed Exceptionally Well in Q2; Raising FVE to $3,200

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

We are increasing Alphabet's fair value estimate to $3,200 from $2,925 as the firm’s second-quarter results not only beat expectations but were also indicative of faster and more sustainable digital advertising growth than we previously expected. An impressive increase in search ad revenue was accompanied by continuing growth in YouTube advertising and subscription revenue, combined with Google gaining further traction in the cloud market. We continue to believe the stock is attractive.

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Company Profile

Business Description

Alphabet 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. Google’s other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue. Alphabet’s moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet’s operating margin has been 25%-30%, with Google at 30% and other bets operating at a loss.

Contact
1600 Amphitheatre Parkway
Mountain View, CA, 94043
T +1 650 253-0000
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Aggressive Growth
Employees 144,056

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