Investors Aren't Waiting for the Alphabet's Q3 Results, Pushing GOOG Stock Higher

Alphabet (GOOG) stock moved back over $100 yesterday, as investors aren't willing to wait for the company's Q3 results. The earnings release is due to be reported on Oct. 25. But as of Oct. 17, GOOG stock was trading back to $100.78 per share, after having dipped to $95.98 on Sept. 330. 

Granted GOOG stock is still down over 30% YTD. But investors are pushing the stock higher, hoping o get a jump on any upward price action as a result of potentially Q3 positive results.

For example, analysts expect Alphabet will still be very profitable this year, despite the possibility of a recession. Barchart's survey shows that earnings per share (EPS) will be $5.21 for 2022. That puts the stock on a price-to-earnings (P/E) multiple below 20x (19.3x).

And for 2023 analysts forecast the company will make $5.80 EPS. This puts it on a forward multiple of just 17.3x. That is very cheap for this stock. 

Where This Leaves Investors Now

The Fed has made it very clear that they intend to continue to raise interest rates. That will inevitably slow the economy and even ad spending. But much of this effect is already discounted in GOOG stock.

So for example, investors now assume that Google's Q3 report will show that Alphabet keeps making higher free cash flow (FCF) and is on track in terms of its stock buyback program. Moreover, astute value investors know that GOOG stock is cheap on a forward P/E basis. For example, Morningstar reports that its average P/E for the past 5 years has been 25.93x or almost 26x.

This implies that the stock could rise to over $150 next year since $5.80 EPS x a forward multiple of 25.93 is $150.39. In other words, investors can potentially count on the stock moving up over 50% from today's levels. This assumes GOOG stock will eventually trade at an average historical P/E.

That's probably one major reason why GOOG stock has been moving up lately. For example, in the last week, it's up over 2.1%, according to Seeking Alpha. That's also why investors are jumping the gun, hoping to get ahead of potential good results for Q3.

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