Alphabet Inc

Alphabet Inc (NASDAQ: GOOGL) is a leading technology Company engaged in products & services like email, maps, search engine, cloud services, YouTube, etc.

Investment Highlights – Sell at USD 2,708.98

• The Moscow court had recently fined the Company for violating Russian rules on banned content.
• On the liquidity front, the current ratio of 3.15x remained lower than the industry median of 3.30x during Q2 FY21.
• The cost-per-impression had shown a year-on-year increase of around 63% during Q2 FY21.
• GOOGL is recently trading very close to the 52-week high, making it difficult for the stock price to show any upside potential.
• The recent Federal Reserve meeting minutes had indicated that tapering might happen this year which may impact the stock prices globally.
• From a technical standpoint, the stock is hovering between the upper Bollinger band and middle Bollinger band, indicating a correction in the stock price.
• Moreover, the MACD line remained lower than the signal line, indicating a bearish movement in the stock price.

Key Risks

• The share repurchase program could impact the volatility of stock price and bring down the cash reserves.
• Being a Technology Company, GOOGL needs to invest heavily in innovation and system maintenance and, any failure to do so will impact brand loyalty and financial performance.
• The Company operates in multiple geographies, and profits can be impacted negatively due to foreign exchange rate fluctuations.
  

Q2 FY21 Financial Highlights for the three months period ended 30 June 2021 (as of 28 July 2021)

 (Source: Company Result)

• The total revenue had witnessed a jump of around 62% to USD 61.90 billion during Q2 FY21.
• On the divisional front, the Google Services segment revenue witnessed a jump of around 63%, and the Google Cloud segment had depicted an increase of approximately 54%.
• The Company had cash & cash equivalents of USD 135.90 billion as of 30 June 2021.
  

One Year Share Price Chart

 (Source: Refinitiv; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company got the benefit of elevated consumer activity online and broad-based increase in advertiser spending during H1 FY21. Moreover, the Company would continue to invest towards the enhancement of technical infrastructure and data centres. However, since the Company is currently trading very close to the 52-week high, there is a good opportunity to book profit at current levels. The stock made a 52-week High and Low of USD 2,767.25 and USD 1,402.15, respectively.

Considering the weak technical indicators and unfavourable valuation conducted above, we have given a "Sell" stance on Alphabet Inc at the closing market price of USD 2,708.98 (as on 18 August 2021) while we will suggest reinvesting after analysing further corporate announcements made by the Company.

Lennar Corporation

Lennar Corporation (NYSE: LEN) is the largest public homebuilder (by revenue) in the United States.

LEN had paid a quarterly dividend of USD 0.25 per share on 19 July 2021, while the ex-dividend date was 01 July 2021.

Investment Highlights – Sell at USD 104.01

• According to the new National Association of Realtors report, the housing price got boosted because of the two-year construction shortage for the new housing.
• The increasing impact of delta variant and rising raw material cost may prove to be an operational headwind for LEN.
• The US markets may witness a correction in the short term as US Federal Reserve got prepared for tapering plan this year.
• The Company is trading nearly 5% lower than the 52-week high, which may lead to a short term correction in the near term.
• From a technical standpoint, the MACD line remained lower than the signal line, indicating a correction in the stock price.

Key Risks

• The rise in unemployment levels and reduction in disposable income may cause a decline in consumer spending tendency
• The delay in the project deliveries amid the Covid-19 pandemic can also lead to financial penalties

Q2 FY21 Financial Highlights for the three months period ended 31 May 2021 (as of 16 June 2021)

(Source: Company Result)

• On the profitability front, the Company had posted a diluted earnings per share of USD 2.65 during Q2 FY21.
• The top-line revenue grew at around 22% to USD 6.43 billion during the period.
• LEN had completed new orders of 17,157 homes during the period, an increase of around 32%.

One Year Share Price Chart

(Source: Refinitiv; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company expects to deliver new homes ranging from 15,800 to 16,100 during Q3 FY21 Moreover, homebuilding gross margins would likely fall between 27.00% and 27.50% during Q3 FY21. The low-interest rates and remote working environment have temporarily fuelled the housing demand.  Meanwhile, it would be advisable to liquidate the position and book profit at current levels. The stock made a 52-week High and Low of USD 110.61 and USD 69.41, respectively.

Considering the high raw material price, supply constraints and unfavourable valuation conducted above, we have given a "Sell" stance on Lennar Corporation at the closing market price of USD 104.01 (as on 18 August 2021).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

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