Alphabet Earnings Preview: New Letters, Same Great GOOGL Stock

Yes, it’s official: Google is now Alphabet (GOOG, GOOGL). This may take some time to get used to as the name is kind of funky. But hey, Google — er, Alphabet — is about being unconventional, right? Definitely. But of course, Wall Street will be more concerned about Alphabet earnings, which will be released at the close of the bell on Wednesday.

Alphabet Earnings Preview: New Letters, Same Great GOOGL StockFor the third quarter, Wall Street is forecasting earnings of $7.20 per share on revenues of $18.54 billion, up from $16.52 billion in the same period a year ago.

Now, it’s true that the results for GOOGL can be choppy. And yes, Wall Street has anticipated this. Consider that the range on the earnings estimate is from $6.13 to $8.09 per share. The same goes for revenues, which goes from $18.22 billion to $19.45 billion.

Despite all this, there is certainly lots of enthusiasm for GOOGL stock from sell side analysts. Then again, it certainly helps that the last earnings report was a blowout. On the news, GOOGL stock spiked 16.3%, adding a stunning $66.9 billion in market cap.

Consider that the company showed a nice improvement in paid-clicks and there was continued momentum in core properties like YouTube, with a 60% increase in viewing hours on a year-over-year basis. What’s more, Alphabet’s CFO Ruth Porat noted that there would be more discipline on spending.

As a result, sell side analysts have been upping their estimates on the company. For example, Credit Suisse analyst Stephen Ju recently upgraded his price target on GOOGL stock from $750 to $815.

GOOGL: A Good Long-Term Bet

For the most part, Alphabet stock offers investors a way to capitalize on a variety of mega-trends, such as mobile apps, cloud computing and video. There are also some speculative opportunities like self-driving cars and even drone delivery.

It certainly helps that GOOGL has assembled a nice portfolio of tier-1 assets, which include Google Search, Android, Chrome, Google Maps and, of course, YouTube. Keep in mind that each of these has over a billion users.

At the same time, GOOGL has a powerful monetization infrastructure. Google Play, for instance, has been a nice way to grab a piece of the mobile apps economy. But there is also DoubleClick, which has been enjoying growth from programmatic advertising.

OK, what about the name change? Well, this is part of an overall new structure. Alphabet is a parent company that now includes a variety of independent business. For the most part, the hope is that there will be more transparency as well as discipline on results.

No doubt, the Alphabet structure will be a hot button for the earnings call.

Bottom Line on GOOGL Stock

For the most part, the valuation is fairly reasonable, trading at about 20 times future earnings. By comparison, Facebook (FB) trades at 34 times forward earnings and Netflix (NFLX) moves hands at a whopping 350 times forward earnings.

If anything, it looks like Alphabet is at an inflection point. That is, the company’s platform is seeing a pickup in momentum from strong investments in major categories. And yes, this can last for some time.

So ahead of the earnings, GOOGL stock still looks like a good bet.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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