Why Has Alphabet Inc. (NASDAQ:GOOG) Stock Jumped 85% Since Early 2017?
Alphabet (NASDAQ:GOOG), Google’s parent company, saw its stock price rise by almost 85% over the last three years, from $820 in February 2017 to about $1519 in February 2020. This rise was primarily driven by a significant increase in Total Revenue, and a slight decrease in shares outstanding. This was partly offset by a lower Net Income margin and price-to-earnings (P/E) multiple.
We break down the movement in Alphabet’s stock price into four factors: growth in revenue, growth in net income margin, a slight decrease in share count, and reduction of P/E multiple.
B] Net Income Rise
- Net income increased from $19.5 billion in 2016 to $34.3 billion in 2019.
- Net income margin reached 22.5% in 2018, primarily due to a better effective tax rate. The margin fell slightly to 21.2% in 2019.
- Total expenses as a % of revenue increased from 78.4% in 2016 to 88.6% in 2017 and fell back to 77.5% in 2018. There was a small rise in this figure for 2019 to 78.8%.
- Notable changes can be seen in the effective tax rate and a decrease in General & Administrative expenses in 2019, which led to a sizable rise in profitability.
C] EPS rise
- EPS has nearly tripled from $26.06 in 2016 to $49.16 in 2019.
- The sharp jump in EPS in 2018 was due to the reduction in the tax rate.
- A gradual decline in the number of shares outstanding also helped in driving the EPS figure higher.
D] Reduction of P/E Multiple
- Alphabet’s P/E multiple reduced from almost 31.5x in 2017 to 30.9x in December 2019.
- Amazon, in the same period, saw its P/E multiple decrease from 169.4x to 93.7x during the same period.
Though we have seen an 85%-jump in stock price for the company in the last three years, Trefis believes that there is still sizable room for growth and maintains a price estimate of $1621 per share for Google’s stock, which is roughly 10% ahead of the current stock price.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 1,453.05.
The projected lower bound is: 1,335.03.
The projected closing price is: 1,394.04.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 7.2269. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 6 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 35.28. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 21 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -162.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 6 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.
Rex Takasugi – TD Profile
ALPHABET INC C closed up 4.730 at 1,393.180. Volume was 51% above average (neutral) and Bollinger Bands were 67% wider than normal.
Open High Low Close Volume___
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,480.65 1,430.61 1,256.15
Volatility: 30 26 28
Volume: 1,574,373 1,604,842 1,444,997
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
ALPHABET INC C is currently 10.9% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of GOOG.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on GOOG.O and have had this outlook for the last 1 periods.