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December 27, 2021
While other ad-based internet companies like Facebook and Snap were dragged down by privacy changes to Apple’s iOS, Google has held up better, thanks in part to its control over the Android operating system and lack of reliance on Apple.
For the full year, revenue is expected to climb 39% to $254 billion, according to the average analyst estimate in a Refinitiv survey. That would mark the fastest growth since 2007 and follows a year of just 13% expansion, as the Google parent reckoned with a brief drop in revenue, for the first time, in the second quarter of 2020.
“Alphabet’s recovery from the 2Q20 COVID-19-induced advertising slump has been remarkable,” wrote analysts from Argus, in a late October report. The firm has a buy rating and wrote, “We see continued momentum in the coming quarters as e-commerce and digital advertising have burgeoned with economic recovery.”
The last time Google delivered better returns for Wall Street was 12 years ago, when the stock more than doubled for the year. Google was a much smaller company then, and its market cap didn’t hit $1 trillion until January 2020.
Less than two years after reaching that milestone, Alphabet added nearly another trillion dollars, peaking just shy of $2 trillion in mid-November. Its market cap sits at $1.95 trillion, as of last week’s close.
It’s not just about advertising.
Revenue in Google’s cloud division climbed 45% to $4.99 billion in the third quarter, while operating loss narrowed to $644 million from $1.21 billion a year earlier. Google Cloud Platform trails Amazon Web Services and Microsoft Azure in the cloud infrastructure market, but it’s benefiting from an emerging multicloud trend, as big businesses spread their workloads rather than relying on a single vendor.
Alphabet also saw big returns from its investment arms GV and CapitalG. Portfolio companies including UiPath, Duolingo, Freshworks and Toast went public this year. Alphabet recorded investment gains of $188 million in the third quarter, up from $26 million a year earlier.
Looking to 2022, analysts’ predictions are more muted, and Alphabet may need to find new growth drivers to continue its outperformance. Revenue growth is expected to slow to 17%, about where it was in 2019, before the pandemic.
Meanwhile, investors are still waiting for some progress out of Alphabet’s “Other Bets.” Its self-driving car company Waymo continues to lose a ton of money, though it made strides in new cities during 2021. Alphabet continues to consolidate other projects that haven’t been able to break out, announcing most recently that its folding Sidewalk Labs, its smart city efforts, into Google.
October 23, 2021
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