Google (Alphabet): What's Ahead from Q3 Earnings This Week?

Summary:

Google (Alphabet Inc.) is scheduled to report its third-quarter results on Thursday. The company surprised the market in Q2.

Google (Alphabet Inc.) is scheduled to report its third-quarter results on Thursday October 29th. The company surprised the market in the second quarter with earnings that were 20% higher than expected. Analysts are expecting Earnings Per Share to come in at $14.78 vs. $12.99 in Q3 of 2019.

There is currently a cloud hanging over the company on news that it is being sued by the U.S. Department of Justice over anti-competitive practices. Investors will be unwilling to get overweight on the company until the details become more clear. Google controls around 90% of the online search market and the lawsuit comes after advertising revenue came in lower for the first time in the company’s 22-year history as the coronavirus eats into ad spending across multiple sectors.

Alphabet’s cloud business has been boosted by the virus due to the increase in work from measures. Analysts are expecting cloud revenues to come in at $3.3 billion, which would be a strong gain over last year’s $2.4 billion in Q3, but this is against overall revenue expectations of $42.8 billion. The real focus will be on whether the company can rebound from the ad revenue slump.

Despite how the earnings play out in the next two quarters, there is still the looming case over Google’s monopoly grip on the search space with some analysts concerned that the company could be broken up. Critics such as Rupert Murdoch’s News Corp. have argued in the past that Google’s search engine should be separated from its third-party advertising platform in order to make it easier for digital publishers to compete for advertising. If the company survives a breakup, there could still be a heavy fine.

Google Technical Outlook

Google shares are trading within a large uptrend channel and price is likely to be contained within this for the medium-term. Yesterday’s weak market saw a bearish close and the price could drop to support at $1,520. A close near $1,640 would see the stock start moving higher to test the recent highs around $1,720.