by Aratrika Dutta
March 30, 2022
Alphabet Inc’s stock underperformed its peer – Apple Inc., Microsoft Corp.
Alphabet Inc.’s market share of -0.15% fell 0.15% to US$2,829.11 on Monday, according to MarketWatch, in what turned out to be a strong trading session for the stock market, with the S&P 500 SPX index, +0.71% up 0.71% at 4,575.52 and the Dow Jones Industrial Average DJIA, +0.27% up 0.27 % to 34,955.89. The stock’s slide snapped a two-day winning streak. Alphabet Inc. Cl A closed US$201.82 below its 52-week high (US$3,030.93), which the company hit on February 2.
Alphabet Inc. is a holding company, with Google, the internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet’s revenue, more than 85% of which comes from online ads. Google’s other revenue comes from app and content sales on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone and smart home products, which include Nest and Google Home, also contribute to other revenue. Alphabet’s investments in its other betting segment, where it is betting on technology to improve health (Verily), faster internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet’s operating margin was 25% to 30%, with Google at 30% and other bets operating at a loss.
The stock underperformed some of its peers, such as Apple Inc. AAPL, +0.50%, rose 0.50% to US$175.60, Microsoft Corp. MSFT, +2.31%, rose 2.31% to US$310.70, and Meta Platforms Inc. FB, +0.80% rose 0.80% to US$223.59. Trading volume (1.7M) remained 368,135 below its 50-day average volume of 2.0M.
While a business’s valuation is important, it shouldn’t be the only metric you look at when researching a business. Preferably, you would apply different cases and assumptions and see how they would affect the valuation of the business. If a company is growing at a different rate, or if its cost of equity or risk-free rate changes sharply, output may look very different.