Please ensure Javascript is enabled for purposes of website accessibility

Why Alphabet Stock Just Jumped

By Rich Smith - Updated Feb 3, 2021 at 10:16AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Google parent crushed it on both sales and earnings.

What happened

Shares of Google parent Alphabet (GOOG -1.47%) (GOOGL -1.35%) rushed out of the gate Wednesday, rising 6% in the first 10 minutes of trading in response to an earnings beat announced yesterday.

Heading into earnings, analysts had estimated that Alphabet would report $15.90 per share in fourth-quarter profits on $53.1 billion in sales, but the company blew right past both those numbers, with EPS of $22.30 on sales of $56.9 billion.  

Rising red stock arrow representing a stock going up drawn on a yellow background

Image source: Getty Images.

So what

Fourth-quarter sales grew 23% year over year, with services revenue up 22% and cloud revenue growing more than twice as fast at 46%. Earnings as calculated according to generally accepted accounting principles (GAAP) increased 45% year over year.

The quarter marked a significant acceleration from Alphabet's performance earlier in the pandemic, lending hope that this story is getting better, not worse. For the full year, Alphabet's sales increased only 13% versus fiscal 2019, and profits only 19%.  

Now what

The momentum seems likely to extend into 2021, with management noting that retail internet searches by consumers nearly tripled year over year in the fourth quarter, while corporate buyers responded to the revived interest by spending more on digital advertising.

CFO Ruth Porat says the company has "significant ongoing momentum," and Wall Street seems to agree. Already this morning, more than a dozen analysts have raised their price targets on Alphabet stock, according to TheFly.com. Among them: Pivotal Research, which took one look at what it called one of the strongest quarterly upside surprises in recent memory, and entered a Street-high price target of $2,750 a share on the stock that's trading at less than $2,100.

Analysts seem to have no doubt which direction Alphabet stock is going in, and this morning, investors agree.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,214.91 (-1.47%) $-33.11
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,207.68 (-1.35%) $-30.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
327%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.