GOOGL

Momentum Across Alphabet’s Business Is “Extraordinary”

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Image: Shares of Alphabet look poised to break out to all-time highs. By Brian Nelson, CFA Alphabet (GOOG) (GOOGL) reported fantastic third quarter results October 29 that showed a beat on both the top- and bottom lines. Consolidated revenue increased 15% in the quarter (16% on a constant-currency basis), to $88.3 billion, versus consensus of $86.2 billion, with Google Services, total, revenue increasing 13% and Google Cloud revenue increasing 35%. ‘Google Search & other’ revenue and ‘YouTube ads’ revenue both increased 12.2% in the quarter, very healthy growth rates. Revenue for Google Network dipped modestly on a year-over-year basis, while Google subscriptions, platforms and devices revenue advanced 28%. Total operating income increased 34% in the quarter, with its operating margin … Read more

DOJ Antitrust Lawsuits Targeting Our Top Two Ideas: V and GOOG

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   Image: Alphabet’s and Visa’s shares have performed remarkably well since the beginning of 2023. By Brian Nelson, CFA We received a number of questions regarding the DOJ’s investigation into anticompetitive practices for two of the top ideas in the Best Ideas Newsletter portfolio. Antitrust news with respect to Alphabet’s (GOOG) ad search business and Visa’s (V) debit card business is nothing surprising, but it speaks to the positives and dominance behind their business models, something we like quite a bit. Any outcome of an antitrust lawsuit is uncertain and could result in a settlement and potential other action, including divestitures. That said, as it relates to Alphabet, the potential for divestitures in its business reinforces a sum-of-the-parts value analysis … Read more

Brain Teaser – Reflexive versus Reflective

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Dear members: — Jason Zweig of the Wall Street Journal, wrote in his pioneering text, Your Money and Your Brain, a few fun examples of how sometimes the psychological process of anchoring and adjustment can trip us up. — In one notable example, Zweig wrote about how two psychologists Amos Tversky and Daniel Kahneman had asked volunteers to spin a wheel of fortune numbered from 0 to 100. The contestants didn’t know that the wheel was rigged to produce either a 10 or a 65 for the experiment. — After spinning the wheel, the contestants were then asked whether the percentage of total United Nations membership made up of countries in Africa was higher or lower than the number that came up. … Read more

Oracle Expects Increased Revenue Growth Throughout Fiscal 2025

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Image: Oracle’s shares have performed quite well during the past couple years. By Brian Nelson, CFA Oracle (ORCL) reported better than expected fiscal first quarter results on September 9, with revenue and non-GAAP earnings per share exceeding the consensus forecast. Total revenue expanded 7% in the quarter (up 8% in constant currency), while non-GAAP earnings per share advanced 17%, to $1.39 (up 18% in constant currency). Cloud services revenue advanced 21% (up 22% in constant currency), while cloud license and on-premise license revenues increased 7% (up 8% in constant currency). Non-GAAP operating income increased 13%, to $5.7 billion, up 14% in constant currency, while its non-GAAP operating margin came in at 43%. Non-GAAP net income increased 18%, to $4 billion, … Read more

What to Do During This Market Selloff

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By Brian Nelson, CFA In short, nothing. The U.S. stock market (SPY) was chugging along nicely until what was interpreted as a very favorable Consumer Price Index (CPI) print on July 11 that sent a rotation out of large cap growth and big cap tech into the beaten down areas of smaller cap stocks, prompting a broader market sell-off. The reasoning goes that, with inflation largely under control, smaller companies will benefit more from future rate cuts via reduced interest expense relative to larger companies. Though this is true, to varying degrees, the magnitude of the rotation was somewhat surprising, as rate cuts should benefit large cap growth (SCHG) and big cap tech (XLK), too, but we’ve seen this rotation … Read more

Alphabet’s Free Cash Flow Faces Pressure in Second Quarter

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Image: Alphabet’s shares have performed well so far in 2024. By Brian Nelson, CFA Alphabet (GOOG) (GOOGL) reported solid second quarter results July 23 that showed a beat on both the top and bottom lines. Revenue increased 15% in constant currency on a year-over-year basis, while the company’s operating margin advanced approximately 3 percentage points. Operating income surged to $27.4 billion, up 25.5% on a year-over-year basis. Diluted earnings per share increased 31.3%, to $1.89. Management commentary in the press release was upbeat: Our strong performance this quarter highlights ongoing strength in Search and momentum in Cloud. We are innovating at every layer of the AI stack. Our longstanding infrastructure leadership and in-house research teams position us well as technology … Read more

Netflix Still Has a Long Runway of Growth Ahead of It

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By Brian Nelson, CFA On July 18, Netflix (NFLX) reported strong second quarter results that showed revenue on a foreign exchange neutral basis increasing 22% thanks to a 16% increase in average paid memberships and a 5% increase in average revenue per member [ARM] on a foreign exchange neutral basis. Global revenue was modestly higher than the company’s beginning-of-quarter guidance thanks to strength in global streaming paid net additions. Netflix’s operating income surged in the quarter, up 42% from the same period a year ago, as its operating margin improved 5 percentage points to 27.2%, both “slightly above (its) guidance forecast due to higher-than-expected revenue.” Second quarter earnings per share came in at $4.88, up 48% on a year-over-year basis, … Read more

Oracle Misses in Q4 But Bookings Performance and Outlook Strong

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Image: Oracle’s shares have done quite well since the beginning of 2023, and management’s outlook speaks to continued strength. By Brian Nelson, CFA On June 11, Oracle (ORCL) reported fourth quarter fiscal 2024 results that missed expectations on the top and bottom line, but the company’s total remaining performance obligations increased a whopping 44% on a year-over-year basis, to $98 billion–up $18 billion from the fiscal third quarter. Total quarterly revenue advanced 4% in constant currency, while non-GAAP operating income jumped 9% in constant currency. Management commented positively in the quarterly earnings press release about the pace of orders and the visibility it provides into the coming fiscal years: In Q3 and Q4, Oracle signed the largest sales contracts in … Read more

Alphabet Posts Strong First Quarter, Initiates Dividend, Launches Huge Buyback

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Image: Alphabet’s valuable properties continue to put up nice revenue growth. By Brian Nelson, CFA On April 25, Alphabet reported better-than-expected first quarter results on both the top and bottom lines. Revenue increased 15%, or 16% on a constant currency basis in the period, while the firm’s operating margin surged higher roughly 7 percentage points, to 32%. Net income leapt an impressive 57% in the quarter on a year-over-year basis, while diluted earnings per share came in at $1.89 versus $1.17 in last year’s quarter and well above the consensus forecast. We liked what we saw almost across the board in Alphabet’s quarterly results. Google Search & other revenue increased 14.4% while YouTube ad revenue growth came in at an … Read more

Alphabet or Microsoft in Artificial Intelligence with Respect to Search? We Like Both

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Image Source: SEO By Brian Nelson, CFA The race to capture the next-generation opportunity in web search technology is fast-developing. OpenAI took the world by storm when it released ChatGPT in December 2022, sparking the proliferation of ChatGPT rivals, the list of a dozen of which can be found here. In this article, we provide a timeline of our take as it relates to large language models with respect to web search technology, and why we view playing both Alphabet (GOOG) (GOOGL) and Microsoft (MSFT) as it relates to search and AI technology may be the best way to approach new developments in this area, which are still in their very early stages. It’s very likely that, if Google search … Read more