Don't Be Surprised if a Company Breakup Makes Alphabet Even More Valuable
Kicking off the Mag 7 earnings bonanza, GOOGL did not dissapoint.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Mag 7 earnings bonanza week is upon us. Five of the seven components will report this week, with Alphabet GOOGL, better known as Google, kicking us off on Tuesday after the bell.
And the company did not disappoint.
Alphabet reported earnings per share of $2.12, which crushed the consensus estimate of $1.84. Revenue of $88.27 billion also beat Wall Street’s $86.3 billion estimate. While the revenue beat was nominal in percentage terms, the company did translate it to a 15% boost on the bottom-line above estimates. Cloud, driven by AI, paced the company, growing at 35%.
“Cloud, driven by AI” will be the siren’s call for Wall Street analysts to sing the praises of Alphabet once again.
Remember the Department of Justice’s (DoJ) claim earlier this month that it was considering a company breakup?
Well, if a breakup does come, don’t be surprised to discover the sum of the parts is worth much more than the whole.
Shares have been trading in a broad channel over the past six weeks, with the $160 level acting as support and $168 as resistance. Heading into the report, bulls pushed the pace, allowing the stock to close in breakout territory.
The rally continued after the bell as Alphabet buyers added roughly $10 to the closing price. If the opening gap holds, Alphabet is looking at filling the July gap when the stock opened $10 lower from the prior day's close. As you may have guessed, this gap lower was a result of the market’s reaction to last quarter’s earnings release.
I would watch for a pullback into the $172 to $174 range, then look to go long on a move back above $175. Of course, when it comes to Mag 7 names, Alphabet could simply gap and go here. It’s not expensive, historically, so a run to $190 may very well be in play.
I’m not ready to chase a gap open, as we may have some trapped traders from the last earnings announcement ready to get out even, but the longer Alphabet remains above $175, the better this name is going to look as a Q4 long and possibly a strong play in the first half of 2025.
At the time of publication, Byrne had no positions in any securities mentioned.
