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Alphabet (Google) share price: Q4 2020 earnings preview

Alphabet share price had outperformed the broad market on a year-to-date basis ahead of their Q4 2020 earnings release. Below we look at the details and expectations for the quarterly report.

Source: Bloomberg

When is Alphabet’s earnings date?

Google’s parent company, Alphabet, is set to release Q4 2020 earnings on Tuesday, February 2, 2021 after the US market close and followed by the management call at 5:00pm Eastern Time (ET). This would be early in the morning on Wednesday, February 3, 2021 for Asia markets, one to watch the US after-hours reaction and futures going into the Wednesday session.

Alphabet’s results preview: What is the consensus expectation?

Alphabet’s share price had risen a strong 19.6% in Q4 2020 and the Street’s estimates for sales and earnings growth do not pale too much in comparison. Specifically, the following expectations had been pencilled in according to Refinitiv data.

  • Earnings per share at $15.90, up 3.6% year-on-year
  • Revenue of $53.10 billion, up 15.2% YoY and from the $46.17 billion in Q3
  • Total advertisement revenue to grow 12.3% YoY to $42.60 billion
  • Google Cloud to show $3.82 billion in revenue, up from $3.44 billion in Q3

Analysts are broadly looking to Alphabet to continue the growth in revenue, and specifically advertisement revenue in the quarter that had seen Covid-19 resurgence and movement restriction orders refreshed in various parts of the world. Although travel related search traffic is expected to have been greatly affected by the Covid-19 implications, Google’s Cloud business is expected to be a strong engine in Q4. Disclosure for the Cloud business’s operating profit will also be made know for the first time in the upcoming release as highlighted by executives in their last earnings release, one that is highly anticipated.

How to trade Alphabet’s Q4 2020 results?

Alphabet stock price had surged in October following the release of their outperforming Q3 2020 results. Strong advertising growth had been a key pillar of support for the positive reception towards the results following early concerns on lingering Covid-19 implications. Given the pleasant earnings surprise had come at the heels of its first-ever revenue decline in Q2, share prices had also risen as much as 9% in after-hours trade. In the event of a strong beat, a similar reaction should not be ruled out.

That said, Facebook’s latest Q4 2020 earnings result had reflected a beat in terms of the advertising revenue but had seen share price under pressure thereafter with the reflection of ‘significant uncertainty’ in 2021, citing Apple’s iOS 14 privacy changes and change in pandemic trends. Although Alphabet’s performance may not be spoken in the same breath as Facebook given the search-driven nature of its advertisement business, the short-term uncertainties surrounding the Covid-19 pandemic and the slow vaccine rollout may still be cited as reasons for concerns. As such, not only would the earnings come into focus, outlook will also be a key concern.

According to Bloomberg consensus, the median 12-month target price for GOOGL sits at $2024.6, which is approximately 10% up from where prices had been trading last Friday, also the last trading day of January. This is accompanied by an overwhelming 90% ‘Buy’ rating from the 43 analysts polled, and indeed not a surprise as the market look to sustainable longer-term growth helped by an expected boost to ad revenue as economic recovery continues and drives further search volume.

Alphabet share price: technical analysis

Alongside the broad market sell-off into end-January, which had also affected the likes of the US Fang index, we have seen Alphabet share price hit back below $1850. Prices had nevertheless found support at $1800 into the close on Friday, January 29, and remains a distance from the uptrend support seen around $1700. A break above the $1900-$2000 level is needed to open up further room on the upside for prices while a dip past the uptrend support would be one to render further caution.

Source: IG

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