Alphabet, the parent company of Google, will reveal its Q2 financial results on Tuesday after the market closes. If you are looking for big price swings on major tech companies, you should watch this stock today, as there will be a lot of speculation before the event.
Last week Snap Inc. revealed poor earnings and blamed the shrinking advertising market. Investors reacted with a steep sell-off, as the company’s stocks crashed by 35%. Alphabet and Meta (previously Facebook) will be in the spotlight this week.
Although Google’s revenue is much more robust and diversified than Snap’s, analysts expect the financial results will also be disappointing as businesses worldwide are cutting costs, which always starts with marketing. Still, global ads spending is expected to grow year-to-year, but by a modest 3 percent.
On Monday, Google closed at $108 per share, below most analysts’ target price. However, this may change soon. A few days ago, investment firm Stifel lowered their target price from $155 to $145, expecting “volatility in results and estimates in near-term.”
The difference between companies like Snap or Twitter and Alphabet or Meta is the size. Fear of recession and global advertising spending cuts will be challenging for the sector, but the most prominent players may weather the storm. Usually, an economic slowdown leads to a further consolidation of troubled markets, which may be beneficial for the most significant players.
Companies like Alphabet, Facebook, and Amazon have absorbed more than 100% of incremental digital advertising spending in recent years.
Traders looking for extra profit opportunities before the announcement of Alphabet’s results in the second quarter need to know that the upcoming troubles for advertising companies might have already been discounted in the stocks’ current price. Alphabet stock price has gone down 44% since February 1, 2022, plummeting from $151 per share to $108.
Analysts expect Alphabet to report earnings at $1.27 per share. This number is significantly lower than a year ago when Google’s parent company reported $1.36 per share. As for the revenue the consensus expects $70 billion in Q2.
After releasing first quarter results on April 26, Alphabet’s stock noted a strong rally appreciating by 7.9% in just a few days. There’s no reason to think it couldn’t be repeated this week.
Google is both dominant and innovative, making it a unique company capable of competing in various strategic areas. Apart from advertising, which is still the search engine’s leading source of revenue, the other units are much more robust. Ads belong to the Google Services segment, where search ads, Android, Chrome, Google Maps, Google Play, and Youtube are generating money. Many direct sales to customers (in-app, YouTube Premium, or YouTube TV).
Another vital segment is Google Cloud, which consists of Google Cloud Platform and Google Workspace. This is an up-and-coming sector that generated $5.5 billion in revenue in Q4 2021 alone and is dealing with cloud computing and machine learning – tech trends that should have a very bright future in the upcoming years.
Having said that, Google is poised to benefit from the digital ads trends and the shift of businesses and individuals to the cloud in the long term. Digital transformation is here to stay, and many savvy investors would hunt for a bargain on Google stocks. The problem with going in long on google this week is that nobody knows if we have hit (or even scratched) the bottom of the global equity market.
Make sure you benefit the most from the increased volatility caused by the upcoming financial results from Alphabet.