Financial Contrast: Alphabet (NASDAQ:GOOGL) and Yahoo! (AABA)

Alphabet (NASDAQ: GOOGL) and Yahoo! (NASDAQ:AABA) are both large-cap computer and technology companies, but which is the better business? We will compare the two companies based on the strength of their dividends, valuation, earnings, analyst recommendations, profitabiliy, institutional ownership and risk.

Valuation and Earnings

This table compares Alphabet and Yahoo!’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Alphabet $94.77 billion 7.00 $31.21 billion $27.55 34.79
Yahoo! N/A N/A N/A ($0.02) -2,958.52

Alphabet has higher revenue and earnings than Yahoo!. Yahoo! is trading at a lower price-to-earnings ratio than Alphabet, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

34.4% of Alphabet shares are owned by institutional investors. Comparatively, 82.2% of Yahoo! shares are owned by institutional investors. 13.2% of Alphabet shares are owned by insiders. Comparatively, 9.2% of Yahoo! shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Alphabet and Yahoo!, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alphabet 1 6 40 1 2.85
Yahoo! 0 14 10 0 2.42

Alphabet presently has a consensus price target of $1,041.60, suggesting a potential upside of 8.69%. Yahoo! has a consensus price target of $49.48, suggesting a potential downside of 16.43%. Given Alphabet’s stronger consensus rating and higher possible upside, analysts plainly believe Alphabet is more favorable than Yahoo!.

Volatility and Risk

Alphabet has a beta of 1, suggesting that its share price has a similar volatility profile to the S&P 500.Comparatively, Yahoo! has a beta of 1.82, suggesting that its share price is 82% more volatile than the S&P 500.

Profitability

This table compares Alphabet and Yahoo!’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alphabet 19.49% 13.66% 11.40%
Yahoo! -0.29% 0.77% 0.50%

Summary

Alphabet beats Yahoo! on 10 of the 12 factors compared between the two stocks.

Alphabet Company Profile

Alphabet Inc. is a holding company. The Company’s businesses include Google Inc. (Google) and its Internet products, such as Access, Calico, CapitalG, GV, Nest, Verily, Waymo and X. The Company’s segments include Google and Other Bets. The Google segment includes its Internet products, such as Search, Ads, Commerce, Maps, YouTube, Google Cloud, Android, Chrome and Google Play, as well as its hardware initiatives. The Google segment is engaged in advertising, sales of digital content, applications and cloud offerings, and sales of hardware products. The Other Bets segment is engaged in the sales of Internet and television services through Google Fiber, sales of Nest products and services, and licensing and research and development (R&D) services through Verily. It offers Google Assistant, which allows users to type or talk with Google; Google Maps, which helps users navigate to a store, and Google Photos, which helps users store and organize all of their photos.

Yahoo! Company Profile

Altaba Inc. (the Fund), formerly Yahoo! Inc., is a non-diversified, closed-end management investment company. The Fund seeks to track the combined investment return of the Alibaba Shares and the Yahoo Japan Shares it owns. Alibaba Shares represent an approximate 15% equity interest in Alibaba Group Holding Limited (Alibaba), and its Yahoo Japan Corporation ((Yahoo Japa) Shares represent an approximate 36% equity interest in Yahoo Japan. In addition to the Alibaba Shares and the Yahoo Japan Shares, the Fund also owns the minority investments, all of the equity interests in Excalibur IP, LLC (which owns the Excalibur IP Assets) and the marketable debt securities portfolio. The Fund’s external investment advisors are BlackRock Advisors, LLC and Morgan Stanley Smith Barney LLC.

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