Google Alphabet increased its revenue in the second quarter that ended on June 30 by 26%, surpassing Wall Street expectations to make a profit of $3.2 billion, despite suffering a hefty $5 billion EU fine.
With more growth recorded from YouTube and search engine, Google would have made $32.6 billion in revenue and $8.2 billion in profit if we exclude the fine by EU. That works out to $11.75 earnings per share (EPS), slightly higher than the average estimate of $9.64 EPS by analysts, according to FactSet. With the fine included, Alphabet has a report of $4.54 EPS, which is down from last year's $5.01.
“We delivered another quarter of very strong performance, with revenues of $32.7 billion, up 26 percent versus the second quarter of 2017 and 23 percent on a constant currency basis,” Alphabet CFO Ruth Porat said in a statement.
Google could worth more than the current market capital
Morgan Stanley analyst Brian Nowak opines that Google would pip it's counterparts on the race for $1 trillion market capitalization if it could disclose the business more to investors. Other companies, including Amazon and Microsoft, provide a clear recurring disclosure which "enable investors to better understand and value underlying business drivers and opportunities," said Nowak, reported by Market Insider. Google Alphabet $1 trillion dollar market capitalization race requires a drive towards achieving approximately $1,400 per share to make this happen.
Alphabet's market capital is currently around $864.05 billion as of July 23, 2018, according to ycharts. Google stock jumped by 5% in after-hours trading on Monday, with class A shares trading more than $1,254 per share as of 23 Jul, 4:00 PM GMT-4, that more than the formal $1,221.59 intraday record. Alphabet class A stock has increased by 15% since this year.
Earlier this year, Alphabet's search engine represented an estimated market capitalization of $410 billion while YouTube was sitting at about $160 billion. That amounted to a total of $570 for the two wealthiest Alphabet's division. Analyst Nowak considered both divisions to be doing just fine alongside its cloud platform estimated to worth $45 billion and $75 billion for self-serving car Waymo. These provided $690 billion from Alphabet's market capitalization of around $726 billion as of February 2018, leaving other of its assets like Google hardware units, Fibre, Google Play, X, DeepMind, Verily, and venture capital at just $36 billion. This value is a lot less than the divisions’ worth, argued Nowak in February. Google Alphabet has the potential of becoming the first company to hit the $1 trillion mark if the divisions are properly valued to attract investors.
Google executives revealed that a major part of the company's revenue growth came from the expansion of Google' cloud computing business and its mobile advertising business. The undervalued divisions are yet to gain light.
Rading Analysis founder Todd Gordon said Alphabet stock is poised to “surge north of $1,500 per share and as high as $1,700”, according to CNBC. However, this would compete subtly with the next financial statement from Apple and Amazon already at $941 billion and $880 billion respectively on the race that appears to be priciest horse race of all time.