Alphabet: Not As Bad As It Seems

The headline numbers from Alphabet (GOOG, GOOGL) certainly did not impress investors, but I thought the company reported a solid quarter with FX-adjusted revenue growth of +23% y/y, which is impressive given GOOG’s revenue run rate of $80 billion. Consistent with my prior view, cost control was better than expected, and this delivered a solid operating margin. More important, mobile search saw improving monetization, while YouTube and programmatic all delivered strong growth. Although the rising mobile TAC and the potential slowdown in the second half may weigh on the stock, I believe the longer-term outlook for GOOG in stable organic growth, followed by attractive catalysts from the “Other Bets” will offset this concern. The stock was down 5.5% after the earnings announcement, and I would buy on weakness. Contrary to…


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