Alphabet Q4 preview: Where next for Alphabet stock?

Charts (5)

When will Alphabet release Q4 earnings?

Alphabet will release fourth quarter earnings on Tuesday February 1.

 

Alphabet Q4 earnings preview

Wall Street forecasts Alphabet will report a 26% rise in revenue to $71.83 billion from the $56.90 billion reported the year before. EPS is set to climb over 17% to $26.48 from $22.54 last year.

Google Services – which includes revenue from its core search engine and advertising on Google and Youtube – is expected to report over 25% revenue growth and a 32% rise in operating income, while its other major division, Google Cloud, is expected to deliver faster topline growth of 41% but remain loss-making.

Revenue (bns)

Q4 2020

Q4 2021E

Google Services

$52.87

$66.45

Google Cloud

$3.83

$5.41

Operating Income (bns)

Q4 2020

Q4 2021E

Google Services

$19.06

$24.23

Google Cloud

($1.24)

($0.82)

 

Notably, Alphabet’s advertising business will be under the spotlight following Apple’s update introduced last year that makes it harder for companies to track user’s online activity and therefore target ads at individuals. While this has caused problems for other big hitters in the advertising industry such as Meta, Alphabet’s vast volume of first-party data it pools from its search engine and YouTube is expected to make it more resilient. YouTube is expected to perform particularly well this quarter as more people continue to shift to alternatives to traditional broadcast TV, which should continue to gradually move more marketing dollars toward the video sharing platform.

The Google Cloud business is expected to see a slowdown in revenue growth in the fourth quarter compared to the third, but demand should remain buoyant as businesses continue to funnel more funds toward digitising their businesses and shifting operations to the cloud. Google Cloud is still a fringe player with just 8% of the cloud-computing market, according to figures from Statista, compared to the two dominant forces in the market that sees Amazon and Microsoft control over half of the market between them. However, Google’s market share has slowly expanded in recent years and has never been higher, demonstrating it is making progress. Microsoft’s earnings earlier this week were driven by its cloud-computing business, which outperformed analyst expectations.

Profitability could come under strain this year if YouTube, which offers lower margins, and the loss-making cloud business grow at a faster pace than its core search business. This is expected to see earnings grow at a slower rate than revenue in 2022, so watch out for the initial outlook. As we noted in our outlook piece for 2022, Alphabet is expected to keep up with its Big Tech rivals when it comes to revenue growth this year but report one of the slowest rates of earnings growth.

You can read our Big Tech outlook to find out the challenges they will face here.

 

 

Where next for GOOGL stock?

Alphabet shares have fallen over 11% since the start of 2022. The RSI recently moved out of oversold territory after sellers managed to push shares to 7-month low of $2,490 on Monday, suggesting this could act as a key floor for the stock going forward.

A move below there reopens the door to the $2,423 level of resistance that surfaced last June, but a breach here would be far more significant as it could see it fall far below $2,400. The gap between the 50-day sma and 100-day sma has narrowed since the start of 2022 and could provide a new bearish signal should they cross, reinforced by the fact trading volumes have been higher ahead of the results than compared its last three quarterly earnings reports and the bearish RSI.

On the flipside, shares have spent the last week testing the 200-day sma at $2,673, which is the first level it needs to surpass before it can target both the 50-day sma and 100-day sma at $2,840. Above there, the stock can eye the December ceiling at $2,966 before the all-time high of $3,019 comes back into play.

Alphabet shares struggle to gain ground in early 2022

 

How to trade Alphabet stock

You can trade Alphabet shares with City Index in just four easy steps:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for ‘Alphabet’ in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade

Remember, Alphabet has two classes of shares listed. The main difference is that GOOG shares carry no voting rights, whereas GOOGL shares do, although they largely track each other in terms of share price movement. Both are traded by City Index clients, although GOOGL is more popular.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.