Alphabet (GOOGL) Stock Sits 10% Below All-Time High After Strong Q1 – Time to Buy?

TLDR

• GOOGL is trading around $164.26, roughly 10% below its all-time high of $408.61
• Q1 revenue rose 22% year over year; operating income up 30%
• Gemini app monthly users doubled to 900 million
• Google Cloud revenue jumped 63%, with operating margin expanding from 18% to 33%
• Analyst consensus is “Moderate Buy” with an average price target of $413.13

Alphabet (GOOGL) opened at $364.26 on Wednesday, sitting about 10% off its 52-week high of $408.61. The stock is up roughly 107% over the past year, but has pulled back in recent weeks as investors weigh valuation concerns against strong fundamentals.

Alphabet Inc., GOOGL

The Q1 numbers were hard to argue with. Revenue came in at $109.9 billion, up 22% year over year, beating estimates of $106.98 billion. Operating income rose 30%. EPS hit $5.11, more than doubling the consensus estimate of $2.64.

Google Search revenue grew 19% in the quarter. That business continues to throw off the cash that funds everything else Alphabet is building.

Google Cloud was the standout. Revenue surged 63%, helped by strong cloud demand and growing external sales of its custom AI chips — Tensor Processing Units, or TPUs. The division’s operating margin expanded from 18% to 33% in a single year.

The Gemini app hit 900 million monthly users, doubling its user count. That’s a real data point for a product that’s been under pressure to prove its commercial value.

Valuation Is the Debate

On valuation, things get more nuanced. Using price-to-cash-from-operations (CFO), Alphabet is trading above its own 10-year average. That said, Microsoft and Apple have averaged price-to-CFO ratios of 25.7 and 26.7 over the past five years, so Alphabet isn’t dramatically out of line with big tech peers.

The stock carries a P/E of 27.78 and a P/E/G ratio of 1.56. Its market cap sits at $4.41 trillion.

Analysts, for the most part, remain constructive. Rothschild & Co Redburn raised its price target from $390 to $430 with a Buy. Wells Fargo kept its Overweight rating and lifted its target to $435. JPMorgan maintained its Buy. The consensus across 54 analysts is “Moderate Buy” with an average target of $413.13.

Not everyone is bullish — Sanford C. Bernstein holds a Market Perform with a $390 target, and Wolfe Research cut its target to $360, though still rates it Outperform.

Institutional ownership stands at 40.03% of the float.

Insider Activity and Dividend

On the insider front, CEO Sundar Pichai sold 32,500 shares on March 18 at an average of $307.89, totaling just over $10 million. The sale was made under a pre-arranged 10b5-1 plan and reduced his stake by 1.94%.

CAO Amie Thuener O’Toole also sold 617 shares on April 1 at $289.63. In total, insiders sold 193,016 shares worth $17.28 million over the last quarter. Corporate insiders hold 11.61% of the stock.

Alphabet raised its quarterly dividend to $0.22 per share, up from $0.21. It was paid June 15 to holders of record as of June 8. The annualized yield is 0.2%.

Analysts expect full-year EPS of $14.29. The 50-day moving average is $356.15; the 200-day is $329.17.

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