Alphabet (Google)
Alphabet Inc., Google’s parent company, will be the second of the FAANG stocks to release its earnings reports for the fiscal quarter ending March 2020. As Wall Street’s tech mammoths get set to post Q1 earnings results, all eyes are particularly on the FAANG group (Facebook, Apple, Amazon, Netflix and Alphabet-owned Google). The FAANGs make up about 15% of the S&P 500—a staggering figure considering the S&P 500 is generally viewed as a proxy for the United States economy as a whole. That said, FAANG’s outcome could immediate impact the market and could determine the movement of the stock market.
Alphabet (Google) reports tomorrow after the US close. The consensus recommendation once again is “buy , according to a poll of analyst by Reuters, with 35 out of 39 analysts having a Buy to Strong Buy recommendation for the stock with a mean target of around at $1,472.18 as given by Thomson Reuters Eikon. (2020).
The information service is expected to have $10.86 in Earnings Per Share, which represents a yearly decline of nearly 6.2%, since the reported EPS a year ago. In the last reported quarter, it delivered a positive earnings surprise of 20.3%. Meanwhile, QTR Revenue is expected to be released at $40.76 billion.
Alphabet’s search market share is a big positive, which along with its focus on innovation of its AI techniques, strategic acquisitions and Android OS should continue to generate strong cash flows for the company. Do not forget that Alphabet’s Google holds 92% of the world’s search market share.
However, tomorrow all eyes will turn to Google’s ad revenues, since the world’s largest digital advertising platform has been negatively impacted by coronavirus outbreak. The COVID-19 has weakened the ad sector, with scores of businesses closed, travel at a virtual standstill and consumers buying fewer goods outside of certain essentials. The virus along with competition on Alphabet’s core business of search advertising from YouTube and Amazon could add a bit of pressure on the company. However the overall AI and product-driven improvements to Google Search sustain an outperformance rate for the share price so far.
Alphabet’s troubles in advertising will likely be balanced by strong cloud growth given increasing demand for digital services.
Other than the risks that company is facing this year, from the positive perspective, Alphabet in an attempt to limitate the impact from the pandemic, it has proceeded in a variety of initiatives which could expand Q1 growth. An example is the provision of all the coronavirus related information (symptoms, prevention, treatments, local statistics (based location) and global ones, among others. ), if the user mention in its search any word related to COVID-19, even if that is in the “Google translate “.
Also, they have launched ched a COVID-19 screening and testing website under Project Baseline in the Q1, called Verily. This website allows the users to complete an online screener based on guidelines from public health officials and see if free testing is available for them. Verily’s engineering innovation, data analytics and clinical expertise combine to help patients take ownership of their health and physicians and caregivers deliver more personalized, evidence-based care.
Last but not least, Alphabet in a collaboration with Apple, they have launch a set of tools, which as BBC reported, ” will alert people if they have recently come into contact with others found to be infected with coronavirus.They hope to initially help third-party contact-tracing apps run efficiently.”
The positive impact of these efforts is likely to reflect on the upcoming results.
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Andria Pichidi
Market Analyst
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