Google’s Alphabet Spells Big Gains for Investors Despite Q1 Miss

  • Larry Page’s five-year tenure as CEO of Google — and now its new corporate parent Alphabet — is reminding investors that patience pays off, despite a letdown in the first quarter.

    After lagging its peers in the early stages of Page’s reign, the Internet’s most powerful company has since delivered returns that trounced both the Standard & Poor’s 500 and Apple shares.

    Since Page took the helm in 2011, Alphabet’s stock has soared 163 percent, creating an additional $300 billion in shareholder wealth. The S&P 500 rose 58 percent during the same period; Apple’s stock is up 115 percent.

    • Alphabet’s first-quarter earnings and revenue that fell below analyst projections.
    • But earnings rose 20 percent from last year to $4.2 billion.
    • Google/Alphabet earnings have now missed analysts’ earnings target in half of Larry Page’s 20 quarters as CEO.
    • Page has insisted, for long, that investors should look at the big picture instead of fixating on how much a earnings rise and fall from one quarter to the next.
    • Since Page took the helm in 2011, Alphabet’s stock has soared 163 percent, creating an additional $300 billion in shareholder wealth.

    Focus on the Long Term

    Some of Alphabet’s gains evaporated late Thursday after the company announced first-quarter earnings and revenue that fell below analyst projections. Both earnings and revenue fell below the analyst projections that steer investor reactions, causing Alphabet shares to backtrack by $39.89, or 5 percent, to $740.11 in extended trading.

    The first-quarter performance will once again test Page’s long-held belief that investors should be looking at the big picture instead of fixating on how much a company’s earnings rise and fall from one quarter to the next.

    Page can more easily brush off Wall Street pressure than most CEOs because he, fellow Google co-founder Sergey Brin and chairman Eric Schmidt are Alphabet’s controlling shareholders, giving them the firepower to outvote everyone else.

    As if to underscore Page’s aversion to short-term thinking, Google/Alphabet earnings have now missed analysts’ earnings target in half of his 20 quarters as CEO.

    Alphabet’s earnings rose 20 percent from last year to $4.2 billion, fueled by a massive advertising network that includes Google’s dominant search engine, Android’s ubiquitous operating system for smartphones, YouTube’s widely watched video service and Gmail. Revenue for the first three months of the period, after subtracting ad commissions, climbed 18 percent to $16.5 billion.

    (This article has been edited for length)

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