On Wall Street, earnings can set the tone for any stock. Knock it out of the park, and your shares can zoom. Whiff, and your numbers and shares can tank.
Google parent Alphabet Inc. (GOOGL) reported a lights-out earnings report yesterday. Let's first recap the results, and then we'll wager on where the stock's heading in the medium term.
- Google parent Alphabet destroyed earnings estimates.
- Shares continue to see Big Money buying.
- Together, this sets up the stock for more upside in the months and years ahead.
Okay, I'll come out and say it: Alphabet destroyed earnings. Not only did revenues jump 62% compared to last year's second quarter to reach $61.9 billion, but they also crushed analyst estimates of $56.2 billion! That's a big beat for a company with a $1.8 trillion market cap.
Diving into a few segments shows a clear narrative: big growth all around. The Google Search & other segment grew 68.1% to $35.8 billion vs. $21.3 billion last year. YouTube ads ramped 83.6% to $7 billion, compared to last year's $3.8 billion. And let's not forget Google Cloud. It grew nearly 54% year over year to $4.63 billion.
Clearly, this was a tremendous quarter for the search giant. As of this writing, shares are up in pre-market trading to $2,737. It's hard not to like these numbers. Even with the company not providing a forecast, my money is on this continued theme: growth!
However, the fundamental picture is only half of the story. How the stock trades is also important. Years of trading on Wall Street taught me to pay attention to market leaders. And Alphabet's stock has been a monster performer in 2021.
As of yesterday, GOOGL is up a staggering 50% YTD. And more impressive, there have been 15 instances of Big Money buying in the shares. That's my proprietary system that flags when the shares ramped in price on juicy volumes, indicative of institutions buying the shares.
Maybe you'd like to see what I mean. Below, I've outlined a few of the Big Money signals GOOGL made in 2021. That's what I call the stairway to heaven!
The trend is clearly up for the stock. And that narrative also lines up with the ramp in accumulation at the bottom of the chart.
Stocks move based on supply and demand. Clearly, the demand for Alphabet has been incredibly strong this year.
The Bottom Line
So, let's tie this all together. Google parent Alphabet trounced earnings expectations. It's not that surprising given the clear message of the stock performance. It appears that Wall Street has been betting on good things coming from Alphabet this year, with a ton of Big Money buying in the shares.
There's an old saying: the trend is your friend. There are two obvious trends that are working for Alphabet in 2021: fundamentals are accelerating, as is the stock price. To this author, that sets up for more gains in the months and years ahead.
As I said last week looking ahead to this earnings report: don't fight a strong trend of earnings beats. And don't fight Big Money buying! Sometimes those are the only clues an investor needs.
Disclosure: The author holds long positions in GOOG & GOOGL in personal and managed accounts at the time of publication.