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Today's big stories

Google-parent Alphabet announced better-than-expected results
Goldman Sachs is singing the praises of one particular earnings season strategy, as well as three stocks you could use it on – Read Now
Sony announced that it’s buying video game developer Bungie

Ooh-gle

What’s Going On Here?

Alphabet posted better-than-expected quarterly results late on Tuesday, and investors sent the Google-parent's share price up 7%.

What Does This Mean?

There were worries coming into this update that higher costs would force companies to cut back on advertising across Google and YouTube last quarter. Still, Alphabet’s results quickly put those concerns to bed: ad revenue climbed by a better-than-expected 33% compared to the same time in 2020. The company did have at least one big expense of its own, mind you: its “traffic acquisition” cost – the cost of driving people to its sites and keeping them there – was higher than analysts were expecting. But Alphabet wasn’t going to let a little thing like that get in the way, and its total profit still came in at a better-than-expected $21 billion.

Why Should I Care?

For markets: Alphabet’s a grower, not a shower.
Here’s the thing: Alphabet’s price-to-earnings ratio – a key valuation metric – was sitting at nearly 22x just before the results, some way shy of Apple’s 28x. In other words, investors were paying 21% less for every dollar of Alphabet’s forecasted profit than they were for that of its rival. This, despite the fact that investment bank analysts are expecting Alphabet to grow its revenue faster than almost all its Big Tech competition this year. And that might be why they’re projecting its share price will climb 25% in the next 12 months.

The bigger picture: There’s life after advertising.
Alphabet isn’t just relying on ads: the company revealed last week that it’s hiring a team of blockchain experts in its cloud segment. The move will allow the company to offer developers – particularly those in the retail, healthcare, and financial services industries – the tools they need to start their own blockchain networks, build decentralized apps, and more. It might be right to get a move on: everyone from Amazon to Coinbase is already trying to establish themselves as major players in the space.

You might also like: How to invest in the unstoppable ascent of cloud computing.

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Analyst Take

What Do These Stocks Have In Common?

Carl Hazeley, Analyst

What’s Going On Here?

US earnings season can be an overwhelming mix of results from hundreds of companies.

So it can be almost impossible to find a method amid all the madness.

But Goldman Sachs has a way for you to do just that: it’s hit upon three very different stocks that have one significant thing in common this earnings season.

Namely, an important strategy that’ll allow you to profit from their updates no matter which direction investors send their stocks afterwards.

So that’s today’s Insight: the strategy you could use to profit this earnings season, and the three stocks the strategy could work best on.

Read or listen to the Insight here

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