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Should Investors Load Up on Alphabet Stock Before Earnings Report?
Stock Analysis & Ideas

Should Investors Load Up on Alphabet Stock Before Earnings Report?

The interrogation spotlight turned on Alphabet (GOOGL) on Tuesday as the U.S. Department of Justice (DOJ) filed an antitrust lawsuit against the search giant. Alphabet, along with its other big tech brethren, has been drawing the regulators’ gaze, with allegations it is using anticompetitive practices to dominate the web search and digital ad market. The lawsuit ramps the heat up significantly.

Whether there will be long tern ramifications for Alphabet’s all conquering business is hard to tell. However, the trial will likely take years to play out and could force the company to reevaluate how its main breadwinner operates.

For now, it all acts as an intriguing backdrop to Alphabet’s upcoming earnings report. The company will post Q3 results on Thursday, October 29, interestingly, on the same day as Amazon, Facebook and Apple — the other tech giants under investigation.

Looking ahead to the print, Monness analyst Brian White expects Alphabet to outperform the firm’s revenue estimates of $39.92 billion (a 1% year-over-year decline while Street forecasts $42.82 billion) and EPS forecast of $9.43 (Street calls for $11.20).

Although White’s 3Q20 projection amounts to 4% quarter-over-quarter sales growth, it is slightly under the four-year average of 5% upticks in previous September quarters.

In fact, the 5-star analyst expects a 10% year-over-year revenue decline for Google Properties and Google Advertising. Although the analyst expects Q4 revenue to match the four-year December quarter average, the overall downward trend is one he expects to further play out over the next several quarters.

White explained why, “With sales up 21% per annum over the past four years, operating profits growing 17% and a dominant position in search with a leadership in digital advertising, we believe Alphabet should trade at a healthy premium to the market and tech sector. However, the impact of the COVID-19 crisis on the economy has resulted in a reduction in digital ad spending and recent ad boycotting campaigns across the industry have exacerbated this challenging environment. As such, we expect Alphabet’s earnings to be depressed in the coming quarters and revenue growth well below historical trends.”

Overall, White keeps a Buy rating on GOOGL shares along with a $1,700 price target, implying possible upside of 10%. (To watch White’s track record, click here)

The rest of the Street remains firmly on Alphabet’s side. Barring 1 Hold, all 31 other recent reviews say Buy, culminating in a Strong Buy consensus rating. There’s 11% of upside in the cards, given the average price target clocks in at $1,805.33. (See Google stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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