Google parent company Alphabet needs to disclose more information about YouTube and Cloud in its results to allow comparisons with other tech giants argues Christopher Rossbach, chief investment officer at J. Stern & Co.
Rossbach points out that last quarter Alphabet saw revenue growth of 19%, below market expectations, but that limited disclosure increased the sense of disappointment.
He contends that the share price declined more than was warranted and indeed has not fully recovered since. He would therefore like to see more information accompanying this quarter’s imminent results.
“In this quarter, we hope to see greater disclosure by management, in particular more details on YouTube. YouTube is a significant advertising engine for Google but its true size and contribution is unclear to investors.
“We believe that if Alphabet took a similar approach to what Amazon did with AWS and disclosed more metrics about its size and scale it would be received positively by the market,” he says.
The investment firm says that Google has many growth opportunities as well.
“Advertising on its Maps properties could focus more on local advertising increasing volumes and differentiation. We would like to see the company provide more information about its future intentions for growth strategies for core Google.
“Facebook has introduced new advertising formats such as Stories, and we would like to get further details about Google’s innovations such as Discovery Ads and Gallery Ads in this quarter,” says Rossbach.
J Stern also says that it is important for Alphabet to provide greater clarity about the Google Cloud business.
“The new leadership team there has made some acquisitions already, notably Looker this quarter. Increased metrics about the size of the cloud business and strategy would also help investors get a better perspective compared to AWS and Azure. At the moment, Google’s cloud business is bracketed along with its hardware and app store. More information about their cloud business would also enable a more useful comparison of Google’s app store business with Apple’s.”
The firm believes Alphabet’s revenues will grow 17% with stable operating margins.