Buy the Pullback in Alphabet Stock After Q4 Earnings?

Investors may wonder if the selloff in Alphabet GOOGL stock is an overaction with the internet services leader exceeding Zacks Q4 top and bottom line  expectations after-market hours on Tuesday.That said, Alphabet shares dipped over 7% in today’s trading session as fears of increased spending and slower cloud growth have raised questions about the company’s ability to compete with big tech peers Amazon AMZN and Microsoft MSFT.   Alphabet's Q4 Results Alphabet's Q4 sales after traffic acquisition costs (TAC) was $81.62 billion, a 12% increase from the comparative quarter, and exceeded Zacks estimates of $81.37 billion. Notably, Google Cloud revenue was up 30% to $11.95 billion versus $9.19 billion a year ago. However, this missed estimates of $12.13 billion by -1.51%, with Amazon Web Services and Microsoft Azure still having a controlling share of the cloud market ahead of Alphabet.Image Source: Zacks Investment ResearchOn the bottom line, Q4 net income came in at $26.5 billion or $2.15 per share which edged expectations of $2.12 and spiked 31% from EPS of $1.64 in the prior period. Alphabet has now exceeded earnings expectations for eight consecutive quarters with an average EPS surprise of 11.57% in its last four quarterly reports.Image Source: Zacks Investment Research Full Year Results Rounding out fiscal 2024, Alphabet’s total sales spiked 14% to $350 billion versus $307.39 billion in 2023. Even better, annual earnings soared 38% to $8.04 per share from EPS of $5.80 in 2023. Alphabet’s CapEx Guidance While Alphabet doesn’t provide specific guidance, the tech giant does expect its capital expenditures to increase by nearly 43% in FY25 to $75 billion compared to $52.5 billion last year. The increase in spending appears to worry Wall Street although Alphabet stated the sharp rise in CapEx will be needed to expand its AI efforts, primarily for its technical infrastructure as it relates to servers, data centers, and networking. Strong Balance Sheet & “Cheap” Valuation Alphabet does have a strong balance sheet that should be able to support these rising costs and still fuel its growth as well. To that point, Alphabet has a $95 billion cash pile and total assets of $450.25 billion which is nicely above its total liabilities of $125.17 billion.  What may also appeal to long-term investors after the post-earnings selloff is that Alphabet still has the cheapest P/E valuation of the Magnificent 7-themed tech stocks at 23.1X forward earnings. This is just beneath Meta Platforms META at 27.1X, with cloud competitors Amazon and Microsoft at 38.7X and 31.6X respectively.Image Source: Zacks Investment Research Bottom Line There are certainly mixed opinions on whether Alphabet will be able to sustain its attractive growth trajectory with GOOGL shares up a very respectable +30% in the last year. For now, Alphabet stock lands a Zacks Rank #3 (Hold).5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alphabet Inc. (GOOGL): Free Stock Analysis Report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks