The Alphabet (NASDAQ: GOOG) stock price jumped by 3.45% on Friday last week as investors prepared for the upcoming earnings season. The stock is still off by about 13% from its all-time high but is 165% above the lowest level in 2020. As a result, it is the best performing FAANG stock in the past 12 months.
Alphabet earnings
Alphabet is the parent company of well-known companies like Google, YouTube, Android, Nest, and Deepmind. It is a giant corporation with a market capitalization of $1.77 billion.
Alphabet will publish its quarterly results on Tuesday after the market closes and there is a likelihood that the firm’s results will be great.
Data compiled by SeekingAlpha shows that analysts expect that the firm’s revenue rose to $71 billion in the fourth quarter of the year. If analysts are accurate, that revenue will be substantially higher than the $56 billion that it generated in the same quarter in 2020. It will also be higher than the $61 billion that it made in the third quarter of 2021.
The company’s profitability is also expected to be robust. Analysts expect that its earnings-per-share rose by about $5 to $21.
These results will be driven by two key segments. First, based on the spectacular results by International Business Machines (IBM) and Microsoft, there is a likelihood that the company’s cloud business did well. Alphabet is among the top 4 providers of cloud computing services, a product that has been in high demand during the pandemic.
Second, Alphabet’s results will be driven by the strong performance of its advertising business. We can assume that most businesses boosted their digital marketing in the final quarter of the year because of the holiday season.
Other things to watch
In addition to these, the Alphabet stock price will react to other things in the report. For example, investors will look at the company’s cash position. In its most recent quarter, the company said that it had over $168 billion in cash and short-term investments.
As such, investors will be looking at what the company intends to do with its hoard. Since Alphabet does not pay dividends, it will likely announce additional plans for repurchases. In the past few years, Alphabet has repurchased its stock worth over billions of dollars. Last year alone, it announced a plan to repurchase $50 billion worth of shares.
Share repurchases are often seen as being better alternatives to dividends because they reduce the number of outstanding shares, which increases the earnings-per-share.
The Alphabet stock price will also react to the company’s cost structure. Unlike big banks like JP Morgan and Goldman Sachs, tech giants like Apple have not had weak results because of the rising wages.
The other catalyst will be the company’s guidance on key tech areas like metaverse and gaming. While companies like Meta Platforms have made plans for the metaverse, Alphabet is yet to make its plans. Therefore, an update about this industry will likely have a positive impact on the company.
Alphabet stock price forecast
The daily chart shows that the Alphabet stock price has been under pressure in the past few days. The stock has declined by over 10% from its all-time high. It has also moved below the 25-day and 50-day moving averages. Most importantly, the shares have dropped below the ascending trendline shown in black.
Therefore, after the tough performance in December, I expect that the stock will bounce back after its quarterly results. If this happens, the next key level to watch will be at $2,800.
