The Market's Disregard for Alphabet Should Make Investors Smile
The current stock market is in no mood to tolerate any earnings misses, whether from a young upstart or a trillion-dollar company. Alphabet (NASDAQ: GOOGL), the parent of Google, found that out the hard way. It missed on analysts' top- and bottom-line estimates, and was punished with a more than 9% drop in its shares the next day.
Sure, Alphabet's earnings were lukewarm. But the market's sell-off of its shares, largely based on one quarter's performance and on top of the pullback over the past year, seems like an overreaction. Placing Alphabet's results in the context of the current economic environment, and looking at its future prospects, actually suggest that now may be an enticing time for long-term investors to add Alphabet shares.
Alphabet's overall revenue for the third quarter (ended Sept. 30) was up by only 6%, reaching $69.1 billion. Google services -- its largest segment at 88% of total revenue and consisting mostly of the ad business -- grew by just 2.5% to $61.4 billion. Both numbers were quite uninspiring. There wasn't much good news on the profitability front, either. The operating margin fell to 24.8% from 32.3%, and the net income margin contracted to 20.1% from 29% a year ago.
Source Fool.com