Google's Q3: Is It Really A Disaster?

Oct. 26, 2022 5:31 AM ETAlphabet Inc. (GOOG)8 Comments
Cavenagh Research profile picture
Cavenagh Research
3.72K Followers

Summary

  • Google missed analyst consensus estimates with regards to both revenue and EPS, which caused Google stock lost as much as 7% in after-hours trading.
  • Google's growth and profitability slowed down sharply in Q3, generating revenues of 'only' $69.09 billion, versus analyst consensus estimates of $70.7 billion.
  • In the earnings call, Google executive said that Q3 was a 'tough time in the ad market', and the company is seeing 'pullback from advertiser spend in some areas'.
  • As long as Google fails to once again deliver strong revenue growth, or show some discipline in operating expenditures, I believe it is reasonable to turn more cautious.
  • I downgrade to 'Buy', from 'Strong Buy' previously. And I now calculate a fair implied share price of $153.25, versus $156.24 prior.

Google Announces EUR 1 Billion Investment In Germany, Including Renewable Energies

Sean Gallup

Thesis

Pre-Q3 I wrote an article about Google where I asked the question if the search giant's September quarter will be as bad as analysts are pricing. Well, it was (unexpectedly) worse. Google missed analyst consensus estimates with regards to both revenue

Google Q3 results

Google Q3 results

Google Q3 results

Google Q3 results

Google valuation update

Analyst EPS Estimates; Author's Calculations

Google sensitivity table - valuation

Analyst EPS Estimates; Author's Calculations

This article was written by

Cavenagh Research profile picture
3.72K Followers
5y experience as an investment analyst for a major BB-Bank. Currently working towards the CFA charter. Passion for risk-assets (Growth, Contrarian, Emerging Market) ex-colleague and close friend of Investor Express

Disclosure: I/we have a beneficial long position in the shares of GOOG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Not financial advise.

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