This earnings season has been disappointing with the top giant’s reporting average numbers due to inflation worries and the impact of the war in Ukraine. Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG) recently reported their first-quarter results and they couldn’t impress investors. Revenue fell below expectations and profits of $24.62 per share were also below expectations. This had an impact on GOOG stock, which dipped after the report. It is down 13.6% in the month. I believe this dip is a good opportunity to add the stock to your portfolio since it still has a lot of room to grow.
When you look at the bigger picture, the results aren’t as bad. Revenue has grown across all segments year-over-year (YOY) and I expect that to continue this quarter. The two biggest contributors to Google’s revenue are its search engine and YouTube. The search revenues for the quarter were up 24% YOY and it continues to remain steady and dependable despite the macroeconomic headwinds. I believe the search engine will continue to contribute significantly to Google’s revenues. The YouTube Ad revenue missed estimates, but it could be due to the rising competition in the streaming industry. However, management is optimistic about the short-form video on YouTube and it continues to see robust growth in the segment.
Further, Google’s cloud computing segment has a lot of space to grow in the coming years. Tech companies are investing in cloud computing and it has become a reliable source of revenue. Cloud revenue was up 45% YOY and continuous investment and expansion of the cloud will help drive growth and revenue for Google.
I think the market reaction to Google’s results is overblown, but this opportunity can be used to take your position. The company may have had a rough quarter in specific segments, but it continues to see growth in various other areas of the business. It remains a dominant player in the industry. Despite the recent weakness, there is ample space to grow. Buy GOOG stock in the dip and hold for the long-term.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.