We see Alphabet (GOOGL) as one of the tech industry's leaders, along with Facebook (FB), Apple (AAPL), Amazon (AMZN), and Microsoft (MSFT), notes Joseph Bonner, an analyst with Argus Research.

These companies have come to dominate new developments in mobile, public cloud, and big data analytics, as well as emerging areas such as artificial intelligence and virtual/augmented reality.

Alphabet — which has risen 41% so far in 2021 — reported 1Q results on April 27; revenue topped the consensus by $3 billion and GAAP EPS beat the consensus by $3.07. Alphabet provides no actual guidance, so large variances from consensus should not be a surprise.

Obviously, the company had a very easy comparison with the COVID-19-affected 1Q20, but the absolute revenue number was right in line with 4Q20 and 4Q19. Alphabet has not seen such strong revenue growth since 4Q12, and has generally grown revenue at 20% +/- rate over the last few years.

We are raising our 2021 GAAP EPS estimate to $86.11 from $67.78 and our 2022 forecast to $97.42 from $83.12. Alphabet does not issue guidance. Our estimates imply 30%. EPS growth on average over the next two years. Our long-term earnings growth rate forecast is 17%.

Search advertising, whether on Google sites or through its third-party Google Network (on desktop or mobile), remains the crucial revenue driver, even as other businesses, like YouTube, Google Play and Google Cloud (the so-called 'second wave') have ramped up to multi-billion businesses in their own right.

Aside from advertising, Google is looking to apply its deep research into artificial intelligence across the company's platforms and applications. Its three primary 'bets' for the immediate future are YouTube, the Google Cloud Platform (GCP), and hardware.

Our financial strength rating on Alphabet is "High", which is our highest rating. The company's credit ratings are in the high A's, high-quality investment grade, with stable outlooks.

The company does not pay a dividend. Alphabet repurchased $8.5 billion of its stock in 1Q21 after buying back $18.4 billion in 2020 and $31.1 billion in 2019. The share count has fallen about 1.5% in the last 12 months.

Google appears committed to resuming large share repurchases, and, with both $137 billion in cash on the balance sheet and $50.7 billion in trailing 12-month free cash flow, certainly has the liquidity to do so.

The Department of Justice antitrust complaint against the company and related regulatory actions, including possible legislation, are perhaps the most serious threat to Alphabet. State attorneys general piled on with their own federal antitrust suits in December 2020.

We think these antitrust cases are serious, though it will probably take years for them to play out and they may be difficult to prove in court. New legislation, while a threat, may also face difficulty in a divided U.S. Congress.

The company faces headline risks over these lawsuits and investor uncertainty over regulatory outcomes may create an overhang for GOOGL shares. Of course, the company faces possible sanctions if the outcomes are unfavorable.

Alphabet's recovery from the 2Q20 COVID-19-induced advertising slump has been remarkable. We see continued momentum in 1H21 as e-commerce and digital advertising have burgeoned with stay-at-home consumers flocking to the Internet for shopping and entertainment.

We believe that the shares remain attractively valued given the company's rapidly expanding businesses. Alphabet's trailing EV/EBITDA multiple of 23.5 is below the peer median of 24.6.

The forward EV/EBITDA multiple of 16.5 is 2% below the peer average, compared to an average discount of 14% over the past two years. We are maintaining our "buy" rating on GOOGL and raising our target price to $2800.

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