Investment gains often played a big role in earnings beats for GOOGL stock in 2020 and 2021 amid rising stock prices. But when Google parent Alphabet reports first-quarter earnings in late April, one question is whether it'll mark down the value of some investments as growth stocks now struggle.
First quarter earnings for Google stock are due out April 26.
Under generally accepted accounting principles (GAAP), investments are recorded as unrealized gains until sold. According to FactSet, Google stock had $11.18 billion in unrealized gains in 2021, second only to Berkshire Hathaway's $76.37 billion.
Meanwhile, Alphabet's venture capital arms have been aggressive investors in tech startups.
In the fourth quarter of 2021, Google earnings jumped 38% to $30.69 per share, including a $2.84 per-share gain in equity investments.
A recent UBS note speculated that under mark-to-market accounting rules, Google could take a noncash markdown on some investments in its first-quarter earnings of 2022.
GOOGL Stock: Headline Risk To GAAP EPS?
In addition, any markdown would be a "potential risk to headline GAAP EPS," noted the UBS report.
In the first quarter of 2021, Google disclosed a net gain on equity investments of $4.75 billion, representing 22% of Alphabet's pretax income.
Other companies with high unrealized gains in 2021 included Blackstone, Bio-Rad Laboratories and KKR & Co., according to FactSet.
Among tech companies, Shopify had $2.86 billion in unrealized gains, Uber Technologies $1.14 billion, and Microsoft $1.06 billion.
Google Stock Approaching Buy Point
In addition, GOOGL stock has dropped 1% in 2022 as of Tuesday's market open.
Also, Google stock holds an entry point of 3,031.03 on a daily chart, according to IBD MarketSmith. Shares are working on a handle from a cup base.
Meanwhile, Google stock owns an IBD Accumulation/Distribution Rating of B-. That rating analyzes price and volume changes in a stock over the previous 13 weeks of trading.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
