The biggest story in markets Tuesday is Alphabet (Google GOOGL -4.10%) overtakingApple AAPL +0.00% for the crown of biggest market capitalization. An earnings-driven rally is to thank for the milestone, which also added more than a billion dollars apiece to the fortunes of founders Larry Page and Sergey Brin.
Larry Page and his co-founder Sergey Brin saw their fortunes rise by more than a billion dollars after Alphabet’s earnings-driven rally. (David Paul Morris/Bloomberg)
Alphabet shares touched a record high of $810.35 apiece, and were sitting just below the $800 mark Tuesday afternoon in New York, up about 3.5% for the session. Those gains added $1.2 billion each to Page and Brin’s net worths (now $39.7 billion and $38.9 billion respectively, and $264 million to Executive Chairman Eric Schmidt’sstake.
Monday evening’s results sent analysts rushing headlong to raise their already-lofty price targets for Alphabet shares. Five firms now predict shares will climb above $1,000 per share, while the average of 43 analyst targets is $918.39, according to FactSet, about 15% above current levels.
While Google’s gains over the last few years have been a key element in catching up to Apple’s market cap, the latter has fallen sharply from its peak market value of over $700 billion.
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Outside the Alphabet orbit it wasn’t such a great day for billionaires. With the broader market sliding Tuesday — the major averages were down about 1.5% — Amazon.com's AMZN -6.34% Jeff Bezos and Berkshire Hathaway's BRK.B +% Warren Buffett both took billion-dollar haircuts on their fortunes.
While many observers eagerly anticipated the new quarterly reporting structuredetailing Alphabet’s “Other Bets” like autonomous cars and connected devices business Nest, it was the strength in the core business, not how much those other efforts are costing, that “stole the show” according to Goldman Sachs’ Heather Bellini.
“Strength in mobile search and YouTube were again called out as key drivers of the company’s performance,” she wrote in a research note. Those results help drive core Google’s earnings to $23 billion for 2015, making a $3.5 billion loss in Other Bets far easier for investors to stomach.
While Page, Brin, and Schmidt, are the ones with the billion-dollar fortunes, CFO Ruth Porat’s fingerprints were all over the Alphabet quarter. The company bought back $1.8 billion in stock and raised its repurchase authorization to $3.7 billion.
Porat also said on the conference call, which she co-hosted with Google CEO Sundar Pichai, company plans to hold debt at the holding company level, rather than in the operating units, allowing for “greater flexibility.” The move opens up the possibility Alphabet could match Apple’s method of borrowing money for buybacks or investments, instead of paying taxes to repatriate cash held overseas.
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