Alphabet (Google) share price: what to expect from Q2 results?

Between better cloud revenue expected and a continued hit to advertising returns, Alphabet’s Q2 performance will be scrutinised on whether the worst is, indeed, behind it.

When will Alphabet release Q2 earnings results?

Google’s parent company, Alphabet, will be reporting second-quarter (Q2) 2020 earnings after the US market close on Wednesday, 30 July. This will be for the April to June 2020 period, with after-hours trade expected to capture some of the early reactions.

What to expect with Alphabet’s Q2 2020 earnings performance?

Alphabet’s Q2 earnings per share (EPS) is expected at a weaker $8.23 according to Refinitiv polls, whereupon materialisation, would mark a continued slump from the $9.87 registered for Q1. This may also be a second consecutive quarter of sub-$10 EPS for Alphabet after having climbed above the level since Q2 2018. The good news is perhaps the fact that earnings are expected to rebound after this Q2 2020 trough, although, Alphabet’s share price had appeared largely unperturbed thus far, with the surge to a fresh all-time high above $1500 this month.

Q2 2020 revenue for Alphabet is expected to slump in the upcoming release, falling by 4.1% year-on-year (YoY) to $37.37 billion. Net income meanwhile will be due for a steeper drop of 42.7% to $5.7 billion, according to Refinitiv consensus. Mixed fortunes may be expected across the various segments in the upcoming earnings release as a result of the lingering Covid-19 implications on the global economy. Specifically, cloud revenue may be one to excel on account of the telecommuting trend and sustained stay-home situation for most of Q2. A build-up of the pipeline also appears to also be the case, although how well Alphabet’s Google may be able to monetise in the coming quarters remains to be seen.

On the flipside, advertising revenue is expected to continue taking a hit in Q2 with businesses, particularly tourism-related companies and the likes, lowering their demand within this segment. As with Q1, YouTube is widely expected to buck the wider trend and see growth on the increased engagement, but it may not be enough to offset the overall ad revenue weakness.

How to trade Alphabet’s earnings release?

Alphabet stock price had risen more than 7% on the day after its Q1 2020 earnings release, despite missing earnings estimates and beating only with sales. Investors had been heartened by the management’s view that the sharpest hit to revenue may have passed. That said, the recent resurgence in Covid-19 cases, particularly across the US where Google draws almost half of its revenue, will be one to watch for management’s address.

Alphabet’s latest share price is seen just above $1500, sitting near the top end of its 52-week range after pulling back slightly from the all-time high. Consensus target price for Alphabet remains relatively elevated at $1690.51 on Refinitiv, with recent recommendations leaning towards the higher end of the spectrum. A beat here in terms of earnings and sales may see to elimination of this event risk and enable prices to continue the climb. Vice versa, disappointments or weak outlook could jeopardise prices, although dips may be kept shallow here given the overall expectation for Alphabet to retain strong long-term growth potential.

Alphabet (Google) share price technical analysis

Alongside US FANG stocks, Alphabet had seen share price retrace losses from the initial Covid-19 hit. Prices had kept to an uptrend since the late-March trough, breaking above the $1500 first in early July. This resistance-turned-support had mostly curbed downsides as prices oscillate around $1530 since mid-July, but any dip below with the upcoming earnings reaction can see to a pause. Broadly, however, prices retain a strong long-term uptrend.

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