Market News & Analysis
Three Key Themes to Watch When Google Reports Earnings Tonight
Matt Weller, CFA, CMT February 3, 2020 11:53 PM
In a clash of two storied NFL franchises, the Kansas City Chiefs celebrated an exciting come-from-behind victory over the San Francisco 49ers in Super Bowl 54 last night. For traders, a similarly titanic struggle has shaped over past week: coronavirus fears vs. tech stock earnings optimism.
As my colleague Fiona Cincotta noted late last week, US technology stocks have generally reported impressive earnings figures so far this month (with the big exception of Facebook), driving already massive firms like Apple (AAPL) and Amazon (AMZN) to fresh record highs and keeping broader indices afloat despite the rapid spread of coronavirus. With that high bar set, the stakes are elevated heading into this evening’s earnings report from Alphabet, Google’s $1T parent company and the last of the FAANGs to report.
Key figures to know ahead of GOOG’s earnings report:
- Consensus EPS estimate = $12.76 (-0.1% y/y).
- Consensus revenue estimate = $46.87B (+19.3% y/y).
- GOOG has beaten earnings estimates on 7 of its last 8 reports.
- GOOG has beaten revenue estimates in 6 of its last 8 reports.
- 42 of 47 analysts covering google have buy/overweight ratings on the company; the remaining 5 analysts have hold ratings on the stock.
- These analysts’ average price target for GOOG is $1542, according to FactSet.
Three Key Themes
- In recent months, Google’s most successful tech rivals have thrived by diversifying away from their core businesses and into fast-growing new business streams (see Apple Services + Wearables, Amazon web services, and Microsoft Azure). While GOOG has no shortage of alternative business lines, including YouTube and its self-driving subsidiary Waymo, traditional search advertising still provides the vast majority of GOOG’s revenue and profits. One way or another, bulls will be watching closely for signs of growth in Alphabet’s alternative businesses.
- Another major theme will be the impact Google’s C-Suite turnover. In recent months, Google’s co-founders Larry Page and Sergey Brin stepped away from their active roles in the company, adding new responsibilities to CEO Sundar Pichai’s plate. In addition, Google’s Chief Legal officer David Drummond left the company last week amidst an investigation into his relationships with women who worked at the company. Neither of these personnel changes is necessarily cause for alarm, but investors tend to be wary of leadership transitions, so comments on that front will be closely scrutinized.
- The final theme to watch will be the ongoing legal proceedings against Google business practices. The Federal government is probing whether Google’s dominance in online search or its Android platform violate antitrust regulations. Investors have thus far shrugged off similar investigations into megacap tech rivals including Facebook, Amazon, and Apple, so we wouldn’t expect much movement on the legal front this afternoon.
After setting a fresh record high above $1500 late last month, GOOG has pulled back to consolidate in the mid-$1400s over the last week. Technically speaking, the short-term levels to watch will the record intraday high at $1503 and last week’s intraday low near $1420. Given investors’ current demand for growth at all costs, we lean toward a bullish reaction to GOOG’s earnings, with a truly stellar report opening the door for a move into the lower- or mid-$1500s. That said, a disappointing reading could still break $1420 support and expose the lower end of the recent bullish channel near $1375.
Source: TradingView, GAIN Capital.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.