Alphabet Weekly updates

Intoduction

This page will include a small summary of any significant news/annoucements around Alphabet and any impact this may have on our price target.

W/C 10/10/2022 (Author: Joshua Harrod)

  • Poor share price performace due to weak advertising revenue growth, provides opportunity to buy at a discount

  • Q3 revenue growth likely to be in line with Q2's YoY poor performance, could lead to new lows

  • Still a buy reccomndation, able to cash in at a major discount

As we continue to be in a bear market, all stocks have taken a decent hit. Alphabet's price performance over the last month has been poor, which was expected. The last month saw Alphabets price consistently stay below $100, and I predict it could get even worse after their Q3 financial results get published on the 25/10/2022.

The main reason Alphabets price performance has been so weak this year is due to the slowdown in their advertising revenue, which does account for 81% (2021) of their total revenue. Comparing Q2'22 and Q2'21, there is only a YoY increase of 12.6%. Just to be that into context Q2'19 vs Q2'18 = 16%, Q2'20 vs Q2'21 =68%. In all honestly, I think investors are being over critical, yes this is the lowest Q2 to Q2 growth since 2020, however investors are still looking through a COVID lens. Of course, digital advertising revenue boomed during COVID because everyone was at home on YouTube, having nothing better to do than be online all day, so of course revenue growth was impressive. I think this is just Alphabets revenues adjusting to the post COVID environment and that YoY growth of 14-18% should be expected over the next 3-5 year cycle. Furthermore, we are in a period of economic downturn, therefore companies aren’t exactly jumping to make big purchases on advertising.

I still keep my Buy recommendation however would say to wait till after the earning release as depending on the results, we could see the stock trade at new lows. I do expect Q3'22 YoY to be in line with Q2'22 YoY therefore the stock price should take a slight hit. Heading into the Christmas period I’m sure revenues should improve slightly however this year has not been Alphabets finest.

It is a great chance to get in on Alphabet at a discount during this bear market!