4 Alphabet Analysts Break Down Q2 Earnings: 'Google Remains Our Top 2021 FANG'

Alphabet, Inc. GOOG GOOGL hit new all-time highs on Wednesday after the company reported second-quarter earnings and revenue beats.

Alphabet reported adjusted second-quarter EPS of $27.26 on revenue of $61.88 billion. Both numbers far surpass analyst estimates of $19.34 and $56.16 billion, respectively. Revenue was up 62%.

Alphabet reported more than $7 billion in YouTube revenue, beating analyst estimates of $6.37 billion and representing 83% growth from a year ago. YouTube’s total revenue has nearly reached the $7.34 billion reported by streaming video leader Netflix, Inc. NFLX in the second quarter.

Google Cloud revenue in the quarter was $4.63 billion, up 53.8% and exceeding analyst estimates of $4.4 billion. Traffic acquisition costs (TAC) for the quarter totaled $10.93 billion, above analyst expectations of $9.74 billion.

Related Link: Tesla's Stock Pulls Back After Q2 Earnings: What Do Analysts Think?

Search Business Booming: Bank of America analyst Justin Post said the earnings beat was driven in part by Google’s artificial intelligence and machine learning technology.

“Google remains our top 2021 FANG and we see room for more multiple expansion given: a more cohesive go to market strategy, evidence of AI/ML advantages across the product stack, more shareholder friendly management (expense commentary on the call was benign, controlled 2Q hiring/opex, and continued share buybacks),” Post wrote in a note.

Morgan Stanley analyst Brian Nowak said Google’s quarter highlights the expanding total addressable market for online advertising.

“GOOGL’s broad-based 2Q ad beat — 68% Y/Y Search growth (vs us at 55%), 84% Y/Y YouTube growth (vs us at 70%) — further reinforces our macro view about the structural acceleration and TAM expansion (driven in part by omni-channel retail)underway in online advertising,” Nowak wrote.

YouTube And Cloud Creating Value: Needham analyst Laura Martin said Alphabet has a tremendous growth outlook, and YouTube is far from fully valued.

“We calculate that YouTube would add 45% to GOOGL's share price if separately traded,” Martin wrote.

Raymond James analyst Aaron Kessler said narrowing operating losses in Google Cloud is a bullish sign.

“GCP called out three key trends including security (cyber/ransomware), real-time data analytics and deep expertise in AI/machine learning, and strong growth in Google Workplace,” Kessler wrote.

• Ratings And Price Targets: Bank of America has a Buy rating and $3,150 target.
• Morgan Stanley has an Overweight rating and $3,000 target.
• Needham has a Buy rating and $3,200 target.
• Raymond James has an Outperform rating and $3,200 target.