Alphabet: Yet Another Brilliant Quarter Enhanced by Upcoming Stock Split Benefits

Alphabet (GOOGL) (GOOG) put out an impressive quarterly result yesterday. Alphabet put a sizzling performance, with Q4 2021 reporting 32% YoY revenue growth. The company reported for the quarter ending Dec. 31, it earned $30.69 a share, on revenue of $75.33 billion in revenue, compared to an income of $22.30 a share, on sales of $56.9 billion in the same year-ago period. It easily smashed the Wall Street expectations, which had forecast the company to earn $27.24 a share, on $71.83 billion in revenue. Excluding the traffic acquisition costs, Alphabet reported revenue of $61.9 billion, while analysts had forecast $59.3 billion in sales.

Alphabet, whose shares closed Tuesday at $2,757.57, also announced an impending 20-for-1 stock split "in the form of a one-time special stock dividend" on each of the company's Class A, Class B and Class C shares. If the split is approved by Alphabet shareholders, all shareholders as of July 1 will automatically receive new company shares on July 15.

During the investors’ call, CEO Sundar Pichai said, among other things, that “Last year, the number of YouTube channels that made at least $10,000 in revenue was up more than 40% YoY, and the company is continuing to improve support for artists and creators.[...] In Q4, Cloud revenue grew 45% YoY to $5.5 billion. Alphabet's backlog increased more than 70% to $51 billion, most of which was attributed to Google Cloud. That growth came from many leading businesses including Albertsons and LVMH; as well as IT heavyweights including Box and Spotify; and public sector agencies including the Commonwealth of Massachusetts, the Defense Innovation Unit and the USDA.”

Alphabet also outlined the majority of its revenue came from Google advertising, which included sales from search, YouTube ads and Google network ads. Such advertising revenue totaled $61.2 billion, up from $46.2 billion in the fourth quarter of 2020. All in all, at P/E at around 25x and P/S in the area of 7.2x, the company’s virtual monopoly provider status, and taking into account the above-mentioned stock split, Alphabet has the additional upside of around 12-15%, all things equal. However, the stock’s long-term growth prospects largely depend on several internal and external factors, including the likelihood and depth of Fed’s monetary tightening.