Alphabet 3Q numbers - Still going strong

Alphabet 3Q results

Stick with the theme of Prof. Scott Galloway here. In his book The Four he says that GOOGLE is a modern man's God. Where our advantage lies as a species is that we have a superior brain to all other animals.. A brain that is so robust it can ask incredibly complex, nuanced questions but our brain isn't robust enough to answer these questions. As society becomes more affluent and educated, its dependence on a super-being decreases and church attendance goes down. Our questions don't get any easier or simpler. GOOGLE appeals to our need for a super-being as it creates a cerebral attraction to the need for answers to everything thats occupying our thoughts.

You can type in anything on the GOOGLE search box and you're guaranteed to get back an answer.

The cash flush one-trick pony Alphabet reported mouth watering third-quarter numbers on the 26th of October 2017 sending the shares soaring 2.5% higher in late trade on the day.

How did the company do compared to Wall Street Expectations?

-Made a record in Revenues of $27.8 Billion, up 23.8% fastest acceleration in growth since the financial year 2012
-Operating income jumped 35% year-on-year to $7.8 Billion
-Earnings Per Share of $9.57, beat by $1.24

Alphabet's search business GOOGLE sales were up 21% to $24.1 Billion and still accounts for 87% of all the group sales, thanks to strong advertising revenues and a hawk-like eye on cost control efforts by Ruth Porat and her team. Cost-per-click also accelerated at a faster rate than ad revenues as traffic acquisition costs went up 71%. This came from expensive sources which now are mostly mobile. The company spent $3.5 Billion, 25% more than last year in capital expenditure in order to improve customer experience.

"Other Revenues" jumped 40% reporting $3.4 Billion in sales. That includes sales from the Cloud Business, Google Pixel Phone, YouTube Red, Google Play Music etc. Only $302 Million of sales came from "Other Bets" or what the company used to refer to as their "Moonshot" ideas. This includes self-driving car company Waymo, smart-home hardware provider Nest, and their fiber-to-home business Fiber.

You will find more statistics at Statista

There has been a lot of regulatory scrutiny involving U.S. big tech firms, particularly in Communist Europe. They either hate the companies because they are too big and should be broken up, they are monopolies, they are tax efficient, and more recently the issue of fake news. The latter is a real problem for FACEBOOK and GOOGLE. Probably more for Facebook than Google because of the Russian's hand in the 2016 U.S. elections which took place on the Facebook platform. We can only hope for less fines going forward but it doesn't seem so.

Alphabet shares are up 31.6% year-to-date valuing the company at $719 Billion. The current price-to-earnings ratio of 35 and a forward price-to-earnings ratio of around 27 is the cheapest the company has been in a very long time. We are still buyers of Alphabet as we still see some value in the Video and Cloud Businesses but most importantly more growth on the Search Business as more people move to mobile and seek more answers.