Alphabet reveals Q2 earnings after executing its stock split – Stock Market News



Google’s parent Alphabet is set to unveil its financial figures for the second quarter of 2022 on Tuesday, July 26, after Wall Street’s closing bell. The third most valuable publicly traded company in the US is expected to record a double-digit year-over-year revenue growth but experience a decline in annual earnings. Last weekend, the company completed a 20-for-1 stock split, which is normally considered a sign of strength by investors. However, the current unfavorable environment of rising interest rates, increasing signs of a recession and persistently high inflation could spell greater trouble for tech stocks.

Monetary tightening weighs on tech sector but it’s more than that

Since the beginning of the year, the Fed has entered an aggressive rate hike cycle in an effort to cool down inflation, which is running at multi-year highs. This tightening policy has triggered a long-lasting sell-off in bond markets, which has been pushing bond yields higher, causing discount rates to increase and valuations to decrease accordingly. This development is extremely negative for tech companies as their performance heavily relies on their growth prospects, while higher interest rates could also discourage borrowing, reducing firms’ dry powder for new investments and developments.

Additionally, markets have been flooded with a plethora of risks. Firstly, the high and sticky inflation that has been exacerbated by the Russian invasion of Ukraine and China’s latest wave of lockdowns, has significantly curtailed consumer spending. Since most of Alphabet's business relies on advertising revenue, broader economic slowdown would lead to companies reducing their ad spending in the face of an approaching recession, delivering a direct blow to Alphabet’s core business.  Moreover, Alphabet’s huge exposure to foreign markets could prove to be a major headwind as its income in foreign currencies is continuously devaluing due to the greenback’s outperformance.  

To prepare for leaner times, Alphabet reported that it would start scaling down its operational costs. Indeed, on Wednesday, the company announced that it is advancing its hiring slowdown to a complete pause on hiring for two weeks. The news was enough to lower analysts estimates for the upcoming earnings report as fears that it will not be a temporary halt are mounting.

Ad segment likely to grow more

Despite its efforts to diversify its income streams, Alphabet receives over 80% of its revenue and a high percentage of its profits from digital ads. Its major competitor in the ad industry, Meta, is facing significant issues due to the new privacy policy adopted by Apple, causing it to lose approximately $10 billion dollars of revenue. Therefore, Google’s licensing deal with Apple could enable it to absorb Meta’s lost market share as it is the main alternative option for advertisers. This move will probably enable the firm to boost its revenue and expand its margins due to the lack of competition.

Mixed performance anticipated

Mixed financial figures are expected for Alphabet. The tech giant is expected to post revenue of $70.10 billion for the fourth quarter, according to consensus estimates by Refinitiv IBES, which would represent a year-on-year growth of 13%. Additionally, earnings per share (EPS) are estimated to decrease 5% on an annual basis to $1.29. Furthermore, investors will be closely eyeing the performance of Google's Advertising business to assess the impact of the imposed ban on Russian accounts, with the ad segment’s revenue anticipated to grow 12.2% year-on-year.

Valuation reached attractive levels

On the brighter side, Alphabet’s valuation could be considered attractive for many investors, who bet on its growth prospects but also waited for a potential downside correction to step into the market. The 12-month forward price-to-earnings ratio, which denotes the dollar amount someone would need to invest to receive back one dollar in annual earnings, currently stands at 19.8 against the technology sector’s average of 78.00.

What happens after a stock split?

Alphabet proceeded with a 20-for-1 stock split to increase liquidity and enable retail investors to obtain shares. Usually, companies that perform splits have experienced sustained market outperformance and try to benefit from the immediate positive momentum as most of the times investors want to increase their exposure after the split is completed.

In addition, based on Bloomberg data, S&P 500 companies that executed a stock split have on average outperformed the index during the next 12 months. However, investors should always remember that a company's fundamental outlook is the main factor that could create value and drive a stock price higher in the long run. 

Can the stock price recover?

After a solid 2021, and an even stronger start in 2022, which led to a new all-time high of $151.50, Alphabet’s stock price has lost around 21% of its value year-to-date. This underperformance is mainly attributed to the broader sell-off in risky assets and not to idiosyncratic factors.

A positive surprise in the upcoming earnings report could propel the share price higher towards the recent peak of $120, with another break opening the door towards $131.50, which overlaps with the 200-day simple moving average.

On the downside, further selling pressure triggered by poor financial results may send the price to test the $108.50 barrier, a violation of which could shift attention to the 2022 low of $102.


최신 뉴스



IPO activity slumps as macro headwinds weigh on stock indices - Stock Market News


Are big tech stocks attractive after this selloff? – Stock Market News


Technical Analysis – US 100 index bounces off 200-week SMA, but for how long?

면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.

온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.

이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.

우리는 웹사이트에서 최고의 경험을 전해드리기 위해 쿠키를 사용하고 있습니다. 자세히 읽거나 쿠키 설정을 변경하세요.

리스크 경고: 고객님의 자본이 위험에 노출 될 수 있습니다. 레버리지 상품은 모든 분들에게 적합하지 않을수 있습니다. 당사의 리스크 공시를 참고하시기 바랍니다.