Shopify (TSX: SHOP) stock soared 21.5% Wednesday after reporting stronger-than-expected Q2 sales that morning.

Instead of the US$2.55 billion Wall Street was expecting, Shopify collected US$2.68 billion in revenue in Q2, helped by strong “gross merchandise volume” (GMV) facilitated by its software — US$87.84 billion.

Shopify Q2 earnings

Shopify’s a bit eccentric in how it reports earnings, deemphasizing net income (and earnings per share) and focusing more on GMV, revenue, and free cash flow. In Wednesday’s report, the company boasted of growing revenue 31% year over year, and earning 16% free cash flow margins on its revenue.

GMV grew 31% year over year, resulting in similar revenue growth. Free cash flow generated from these sales, however, grew more slowly at 27%, and operating profits were up only 21% year over year — numbers that may discourage growth stock investors a bit once they notice them.

Is Shopify stock a buy?

Guidance may also come as something of a shock, with management forecasting sales growth to slow into the “mid-to-high twenties percentage rate” in Q3, and gross profit rising even less, in the “low-twenties.” On the plus side, management forecasts free cash flow margin to be somewhere in the “mid-to-high teens.”

If that’s how things play out, it implies Shopify should at least maintain the 16% FCF margin it did in Q2, in the coming quarter — and might even exceed it. That would presumably provide a bigger boost to both FCF and profits.

Speaking of which, Shopify’s US$200 billion market cap today prices the stock at 111 times free cash flow, and more than 87 times net profit. In my opinion, that’s quite a high price for a stock growing at 31% — much less the “mid-to-high teens.”

The post Why Shopify Stock Exploded Higher on Wednesday appeared first on The Motley Fool Canada.

More reading

• What the Average Canadian TFSA Balance Looks Like at Age 50
• 5 Canadian Stocks Worth Buying Today and Holding for the Next 5 Years
• Missed the RRSP Deadline? Here’s 1 Move to Make Now
• 1 Top Growth Stock to Buy in April
• If I Had $10,000 to Invest in Canadian Stocks Today, Here’s What I’d Buy

Fool contributor Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) stock, the parent company to Google, skipped 3% higher through 3 p.m. Monday after announcing it has signed a “special, joint contract” with Indiana Michigan Power (I&M), a subsidiary of electric utility company American Electric Power (NASDAQ: AEP).

AEP stock was up 1%.

Google and AEP: Better together?

The goal of this contract, say the companies, is to support “I&M’s ability to provide reliable and affordable service for all customers as communities continue to experience significant economic growth.”

And the subtext to all that is that Google’s efforts to grow its artificial intelligence (AI) business, its data server farms, and its power needs may place a strain on I&M’s ability to generate and deliver power to other “communities” of customers. To mitigate this strain, “Google will leverage new capabilities that allow it to reduce or shift electricity demand to carry out nonurgent tasks during hours when the electric grid is under less stress.”

Is this good or bad news for Alphabet stock?

The companies didn’t provide any financial figures for how their contract will work, or whether Google will be providing financial support to AEP. Still, if successful, the cooperation between Google and AEP will help to smooth out electricity demand, lower “peak load” demand for electricity, and reduce power costs.

This would be a benefit to both AEP and Google, lowering the latter’s costs and ensuring it has the power it needs, when it needs it, particularly to support its planned $2 billion data center investment in Fort Wayne, Indiana. While it doesn’t necessarily “move the needle” much on Alphabet stock, I’d say it’s still a net positive for the company.

And with Alphabet stock costing only 20x earnings and still growing rapidly, that’s good news for investors.

The post Why Alphabet Stock Popped on Monday appeared first on The Motley Fool Canada.

More reading

• The Best Way for Canadians to Get S&P 500, Nasdaq 100, and Dow Jones Exposure Through ETFs
• How to Use a TFSA to Generate $363 in Monthly Tax-Free Income
• This TSX Dividend Stock Is Down 54% and Worth Holding for Decades
• Oil Is Plunging Today. These 2 Canadian Energy Stocks Are Built to Handle It.
• Canadian Companies With a Track Record of Consistently Raising Their Dividends

Fool contributor Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Alphabet. The Motley Fool has a disclosure policy.

Thursday is looking like a great day to own stocks, and tech stocks in particular — especially tech stocks tied to autonomous cars. If you own shares of Mobileye (NASDAQ: MBLY) or Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) today, you have Intel (NASDAQ: INTC) to thank for it.

Oh, sure. A lot of stocks gaining today are gaining on the back of a 50-basis-point interest rate cut by the Federal Reserve yesterday. That’s one big catalyst. But a second catalyst, and one specific to the self-driving cars industry, is the fact that Intel announced today that it has no plans to sell off its majority stake in Mobileye.

That news is behind the surprising strength in shares of Intel stock (up 3% through 11:10 a.m. ET), and in Alphabet (up 1.8%), and in Mobileye most of all — up 15.3%!

What Intel said about Mobileye

Earlier this month, both Intel and Mobileye got hit by rumors that the semiconductor giant was planning to sell off most of its 88% stake in Mobileye, which makes systems for machine vision in electric cars.

Today, Intel said the opposite is closer to truth. “We believe in the future of autonomous driving technology and in Mobileye’s unique role as a leader in the development and deployment of advanced driver assistance systems,” Reuters quoted the tech giant as saying. And assuming Intel is telling the truth, this means the company sees value in owning a piece of the self-driving cars industry.

That’s good news for Mobileye investors, who now don’t have to worry about a flood of their shares coming up for sale, depressing the share price even more than it’s already fallen this year (73%). It should be good news for Alphabet, too, which announced plans in July to invest another $5 billion in its Waymo self-driving cars venture — despite reporting that Waymo cost it $1.1 billion in losses in Q2.

And if Intel is making the right call here in hanging on to Mobileye, it could even be good news for Intel.

Is Mobileye stock a buy?

Intel of course could really use some good news right about now, after reporting declining revenue and a $1.6 billion net loss (and $3.4 billion in cash burn) in its Q2 report. With less than $1 billion in trailing-12-month profit to support its $89 billion market capitalization, Intel’s hope that Mobileye, which is also unprofitable but does produce free cash flow, will turn into a profit center in the future is a bet that had better pay off.

The good news is that it might.

Analysts polled by S&P Global Market Intelligence don’t think Mobileye will report generally accepted accounting principles (GAAP) profits before 2026 at the earliest. However, the driverless car unit is already generating substantial free cash flow, with $435 million in cash profit expected next year. On a $9.4 billion market capitalization, that doesn’t make Mobileye stock “cheap” exactly. But a price-to-free-cash-flow ratio of 22 isn’t an unrealistic valuation. And with free cash flow expected to triple over the three years following 2025, Mobileye actually does look like an asset Intel should hang on to.

If you’re looking for a good stock to buy, to invest in the driverless cars revolution, Mobileye stock could be it.

The post Why Intel, Alphabet, and Mobileye Stocks All Popped Today appeared first on The Motley Fool Canada.

More reading

• The Best Way for Canadians to Get S&P 500, Nasdaq 100, and Dow Jones Exposure Through ETFs
• How to Use a TFSA to Generate $363 in Monthly Tax-Free Income
• This TSX Dividend Stock Is Down 54% and Worth Holding for Decades
• Oil Is Plunging Today. These 2 Canadian Energy Stocks Are Built to Handle It.
• Canadian Companies With a Track Record of Consistently Raising Their Dividends

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Alphabet, Intel, and Mobileye Global. The Motley Fool has a disclosure policy.