Alphabet (NASDAQ: GOOG) is set to announce its fiscal Q4 2023 results soon, and there are mixed expectations surrounding its performance. Despite its recent strong gains, with the stock soaring 65% since early 2021, beating the S&P 500 by a significant margin, Alphabet has seen inconsistent returns over the past few years. The question on everyone’s mind is, will Alphabet stock continue to outperform the S&P 500, or is a period of underperformance on the horizon?
Strong Gains and Varying Performance
Alphabet’s stock has witnessed a roller-coaster ride, achieving returns of 65% in 2021, -39% in 2022, and a robust 59% in 2023. In contrast, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023. While the company significantly outperformed the market in 2023, it struggled in 2022, highlighting the challenge of consistently beating the S&P 500 for individual stocks in recent years. This trend has been similar for other major players in the Communication Services sector and megacap companies.
Expectations for Q4 Results
The upcoming earnings report for Q4 2023 is highly anticipated. The company’s revenue growth in Google Search, Google Cloud, and Google Other segments was a significant factor contributing to its outperformance in the previous quarter. However, concerns around macroeconomic challenges and a tough market environment have led to varied predictions. It is expected that Alphabet’s revenues will continue to show year-on-year growth in Q4, albeit possibly falling slightly below the consensus estimate. Additionally, adjusted earnings per share (EPS) are anticipated to marginally miss the consensus estimate for FY 2023.
Valuation and Future Prospects
Alphabet’s current valuation is estimated to be 1% below the current market price, based on an EPS estimate for fiscal 2023 and a P/E multiple of just below 26x. This valuation implies a conservative outlook, suggesting that the stock may currently be slightly overvalued.
Market Perspective and Investment Insights
These uncertain times have sparked questions around the future performance of Alphabet’s stock given the current macroeconomic landscape with high oil prices and elevated interest rates. The market is pondering the potential for another period of underperformance akin to that seen in 2022. Investors are eagerly awaiting the Q4 results to gain insight into Alphabet’s trajectory and to assess its ability to outperform the market in the coming months.
Conclusion
The performance of Alphabet stock in the upcoming quarters remains uncertain. Notably, the company has exhibited remarkable resilience in the face of market challenges, consistently delivering strong returns. Investors eagerly await the Q4 results, hoping for positive news that could bolster their confidence in Alphabet’s future prospects. Will Alphabet continue to beat the market, or will it struggle to maintain its recent performance? Only time will tell.
| Returns | Jan 2024 MTD [1] | Since start of 2023 [1] | 2017-24 Total [2] |
| GOOG Return | 7% | 69% | 290% |
| S&P 500 Return | 2% | 27% | 118% |
| Trefis Reinforced Value Portfolio | 0% | 38% | 609% |
[1] Returns as of 1/25/2024
[2] Cumulative total returns since the end of 2016
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