Alphabet Fully Valued; Posts Strong First Quarter

Alphabet (GOOG)(GOOGL) kicked off 2017 with strong first-quarter top- and bottom-line results which came in ahead of expectations. The firm’s dominance of the digital advertising market continues as shown by strong growth in overall ad revenue and slight operating margin expansion over the prior year. Additionally, as expected, Alphabet is also making headway in the growing cloud market. While we adjusted our model to account for the better-than expected first-quarter results, we are not planning to change our $860 per share fair value estimate of this wide-moat name. Alphabet shares are up 4% in after-hours and remain above our fair value, which is why we recommend a wider margin of safety before investing in the name.

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