Alphabet(US:GOOG) Zhao Yin Guo Ji·2024-07-25 01:22Investment Rating - The report maintains a "Buy" rating for Alphabet (GOOG US) with a target price of $218.00, up from a previous target of $185.50, indicating an upside potential of 18.7% from the current price of $183.60 [3][6]. Core Insights - Alphabet reported Q2 financial results with total revenue increasing by 14% year-over-year to $84.7 billion, aligning with Bloomberg's consensus expectations. Net income rose by 29% year-over-year to $23.6 billion, exceeding expectations by 3% due to management's efforts to control expense growth and slow hiring [1]. - The report anticipates that high comparatives will impact revenue growth rates in Q3, and operating profit margins (OPM) will reflect increased depreciation and expenses related to technology infrastructure investments [1]. - The report projects a 3-8% upward revision in earnings forecasts for FY24-26 due to ongoing operational efficiency improvements [1]. Revenue and Profitability - Google Search and other revenues grew by 14% year-over-year to $48.5 billion, driven by strong growth in retail and financial services sectors. YouTube ad revenue increased by 13% year-over-year to $8.7 billion, supported by growth in watch time and improved monetization of Shorts [1]. - Google Cloud revenue surged by 29% year-over-year to $10.3 billion, bolstered by strong growth in the Google Cloud Platform and contributions from AI [1]. - Overall OPM increased by 3.1 percentage points year-over-year to 32.4%, attributed to moderate expense growth and a decrease in headcount [1]. Financial Projections - Revenue projections for FY24E, FY25E, and FY26E are $344.9 billion, $383.5 billion, and $423.1 billion, respectively, with slight adjustments of 0.1%, 0.3%, and 0.5% from previous estimates [5]. - Net income projections for FY24E, FY25E, and FY26E are $92.0 billion, $104.1 billion, and $116.9 billion, reflecting increases of 7.9%, 5.6%, and 3.4% respectively [5]. - The report indicates a projected P/E ratio of 26x for FY25E, aligning with industry averages [6][7]. Market Performance - Alphabet's market capitalization is approximately $2.28 trillion, with a 52-week high of $192.66 and a low of $122.79 [3]. - The stock has shown a 1-month performance of +1.6% and a 6-month performance of +22.1% [3].