Google’s parent company, Alphabet hits trillion-dollar market cap

• Alphabet hit the $1 trillion market capitalization, making it the fourth U.S. company to hit the milestone after Apple, Amazon and Microsoft.
• Despite the company’s seemingly perpetual cultural clashes, Wall Street sees more dollar signs.

Google parent-company Alphabet has hit $1 trillion in market capitalization, making it the fourth U.S. company to hit the milestone.

Apple was the first to hit the market cap milestone in 2018. Then, Microsoftand Amazon followed. Apple and Microsoft are still valued at more than a trillion dollars while Amazon has since fallen below the mark.

Analysts are bullish on the company’s newly appointed CEO, Sundar Pichai. In a surprise announcement in December 2019, Alphabet founder Larry Page announced plans to step down as CEO, along with co-founder and president Sergey Brin.

Pichai had already been the CEO of Google, which includes all the company’s core businesses — including search, advertising, YouTube and Android — and generates substantially all its revenue and profits. But he reported to Page, who also oversaw other businesses making long-term bets on experimental technology like self-driving cars and package delivery drones. Now, he’s in charge of the whole conglomerate, although Page and Brin still have control over most of the company’s voting shares, giving them significant influence in major decisions.

Optimism also comes from the company’s growth in its Cloud business, which — while still far behind the leader Amazon and runner-up Microsoft — doubled its revenue run rate from $1 billion to $2 billion per quarter between Feb. 2018 and July 2019. The company expects similar growth in the year ahead as it continues pouring extensive resources, including tripling its sales force and boosting its Google Cloud Health segment. However, the business does face challenges as it contends with issues surrounding trust perceptions.

Some analyst firms have also noted the company’s stabilized advertising business.

In December, Stifel hiked its price target for Alphabet to $1,525 from $1,325, a 14% upside. Shares of Google’s parent company rose nearly 1% after Bank of America raised its price target on Alphabet’s stock in January, saying it sees a healthy advertising business for Alphabet among other things.

That would be a reversal from recent trends: Last spring, Alphabet closed its worst day since April 2010 after reporting slowing advertising numbers. The stock dropped 7.5%, shaving more than $67 billion from its market cap.

Then, during its third-quarter earnings, it missed earnings per share expectations and showed slowing profit. The company’s stock fell as much as 4% in after hours trading, but eventually recovered at 2%.

The company also faces a number of cultural clashes including a fresh investigation by the U.S. National Labor Relations Board and various state and federal antitrust probes.

With a roughly $620 billion valuation, Facebook appears to be the next likely trillion-dollar tech contender.

Alphabet reports fourth-quarter and full-year 2019 earnings on Feb. 3.

CNBC