CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

Alphabet’s share price on watch ahead of Q1 earnings

Alphabet’s share price is down more than 10% year-to-date and sentiments have been largely mixed. Can its upcoming Q1 earnings provide a lift for its share price ahead?

When does Alphabet report earnings?

Alphabet Inc is set to release its quarter one (Q1) financial results on 26 April 2022, after market closes.

Alphabet’s earnings – what to expect

Current expectations are for Alphabet’s upcoming Q1 revenue to come in at $68.1 billion, up 23.1% year-on-year. In addition, earnings before interest, taxes, depreciation and amortization (EDITDA) for Q1 are expected to come in at $27.6 billion, up 20.3% from a year ago.

Currently, the stock has 12 ‘buy’ recommendations, with no ‘holds’ and ‘sells’. The Bloomberg 12-month consensus target price of $3,420 suggests a potential upside of 31.0%, from the price of $2,610.62 at the time of writing.

Alphabet mostly insulated from Apple’s privacy changes and Russia’s exposure

As economic normalisation continues to take place, Alphabet’s revenue growth has tapered from the Covid-19-led bounce but remained at a strong 35.6% year-on-year (YoY) increase in quarter four (Q4) 2021. Thus far, while Apple’s privacy changes may have an impact on its YouTube ad business, the outperformance in the other segments has shown to underpin the overall advertising business as of the previous quarter. Advertising spending may remain supported with the current strength of the US economy, but the outlook will be more closely watched. Further rotation in advertising spending from traditional media such as television, newspaper and radio to internet also remains a key catalyst to drive longer-term gains in the advertising market.

In terms of Alphabet’s exposure to Russia, it was estimated to account for less than 0.5% of its revenue. Therefore, any direct impact for its business in Russia may seem limited.

Google Cloud as growth catalyst but need to further deliver ahead

The crown jewel for Alphabet’s longer-term growth may lie in its Google Cloud segment. While it is still making losses as of its previous quarter (-$890 million), losses have been pared by 28.4% from a year ago. The latest revenue growth of 44.6% year-on-year (YoY) for the segment may seem attractive at first glance but on relative terms, it does not differ that much from its competitors such as Amazon’s AWS and Microsoft’s Azure. Considering that AWS and Azure takes up around 33% and 21% of market share in the cloud infrastructure service market respectively, while Google Cloud takes up around 10%, we should be expecting a much higher growth rate for Google Cloud. That does not seem to be playing out at the moment.

Further ‘aggressive’ investments into the cloud space has been highlighted by the management and the 70% increase in backlogs in Q4 2021 does provide testament to the segment’s potential. That said, the growth figure for this segment will continue to be on watch, with the need to further deliver ahead in order to drive market share gains.

Interest rate upcycle poses risks to valuation multiple, with strong earnings on watch to deliver a mitigating impact

The glaring theme for financial markets is undoubtedly the impending increase of interest rates ahead, as curbing inflationary pressures take precedence in central banks’ monetary or/and fiscal policies. The general belief is that rate increases could translate into a larger discounting factor for companies’ future earnings or cashflows and therefore, market participants may demand higher growth figures in order to mitigate the effect of rising rates. This may have a larger impact on growth sectors, making these companies more rate-sensitive.

While the inverse relationship between 10-year Treasury yields and Alphabet’s share price has not been clear historically, Alphabet’s earnings growth and cashflow will nevertheless be closely looked upon. Thus far, its earnings growth has been resilient to inflationary pressures and economic normalisation, with a 35.6% YoY increase in Q4 2021. Its free cash flow has also been consistently on the rise, suggesting that they may be less dependent on debt for financing and can rely on their pool of retained earnings. These figures will continue to be on watch to justify their valuation ahead, where economic momentum will clearly lean towards a downward bias.

Stock split in July

Alphabet has enacted a 20-for-1 stock split in February, which will take effect on 15 July and trading will begin on a split-adjusted basis on 18 July. Generally, a stock split does not alter the business fundamentals but the move to lower the share price may make shares more accessible to smaller investors. That may also increase its chance of being added into the price-weighted Dow Jones Industrial Average, which has previously been made impossible due to its high share price.

Alphabet’s shares – technical analysis

From its technicals, Alphabet’s share price has been largely trading within a consolidation pattern over the past months. Recent moves have brought its share price near the lower bound of the range, where the key support level of $2500 will be on watch. That level has supported the shares on at least three previous occasions but multiple retests of support within a relatively short time span may put it at risk of a downward break. Some signs of weakness remain intact with the bearish crossover between the 100-day and 200-day moving average (MA), along with bearish momentum on the moving average convergence divergence (MACD). Therefore, much clearly hangs on the upcoming results to lift sentiments.

Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.