Google’s Bay View campus in Mountain View, Calif.
Noah Berger/ AFP/ Getty Images
Tuesday night is a big one for Alphabet , and for the rest of the stock market.
Google’s parent company won’t only help kick off the earnings-reporting season for big tech after the market closes, it will offer investors a look at how consumers and advertisers are responding to a weakening economy. Microsoft (ticker: MSFT) is reporting as well.
The stock ( GOOGL
) has fallen nearly 26% in 2022, including a loss last week after Snap (SNAP) flagged economic troubles as holding back the social-media app Snap
chat’s advertising business. If Alphabet’s report paints an even gloomier picture, it could hit a range of stocks. On the flip side, a rosier-than-expected update could add fire to a broader rally.
Wall Street forecasts GAAP earnings per share of $1.27, according to FactSet, with revenue of $69.87 billion. Evercorse ISI analyst Mark Mahaney wrote in a Friday note that he forecasts second-quarter revenue of $69.9 billion, though he expects advertising revenue growth to slow down to 10.5% year over year at $55.7 billion.
While Mahaney doesn’t believe Alphabet would be immune to a downturn, he sees it as the most recession-resistant advertising-focused stock. He noted that Alphabet wasn’t affected as much as other ad-dependent internet businesses by Apple ’s moves to curb advertising tracking on its platform without consent. And he said he thinks its cloud segment will be more resilient due to its software as a service, or SaaS, model and the cost efficiencies its offerings present enterprise customers.
Rosenblatt Securities analyst Barton Crockett is also upbeat about Alphabet stock, saying in a note Monday that investors should be willing to hold the shares through the volatility a recession could bring. Though he thinks the actual results could be worse than Wall Street expects, he has a Buy rating and $205 fair-value estimate for the stock price.
“We continue to see long-term strengths in search, YouTube, and Google Cloud making this equity worth owning for the eventual end at some point of recession fears and headwinds,” he wrote. “Also, above-peer exposure to travel ads, which remain strong, could help relative trends near-term.”
Of course, even if both Microsoft and Alphabet’s reports look good, investors won’t be out of the woods. Meta Platforms , Apple, and Amazon.com are reporting results in the days to follow.
Write to Connor Smith at [email protected]
