Alphabet (GOOGL.US) will report earnings for Q2 2022 today after the close of the Wall Street session. Company has recently performed a 20-for-1 stock split but its shares have struggled afterwards, dropping 5% since the split took effect a week ago. Company is expected to report a drop in earnings as well as increase in revenue. However, there are some concerns that the Alphabet may disappoint. Snap has reported a very disappointing earnings that sent its share plummeting. Alphabet is also dependent on ad revenue, just as Snap, so the question is whether Snap's miss was company-specific event or hint of a broader trend. Alphabet has also recently announced that it will slow the hiring process what raises additional concerns about the outlook. On the other hand, ad revenue from search engine services is more stable than ad revenue from social media, like in the case of Snap, so Alphabet may not be hit as hard by a recession. To sum up, focus will be on ad revenue which is expected to slow as well as on the forward guidance for the coming quarters.
Headline expectations
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Revenue: $69.95 billion (+13% YoY)
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EPS: $1.28 (-7.2% YoY)
Market reaction to previous reports
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Average EPS surprise: +9.6%
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Average share price move after 1-day: +4.82%
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Average share price move after 1-week: +5.69%
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Average share price move after 1-month: +7.02%
Alphabet shares (GOOGL.US) experienced a 4.8% gain on average a day after earnings release, with average earnings beat being 9.6%. Source: Bloomberg
A look at the chart
Alphabet (GOOGL.US) has been underperforming over the past week following a 20-for-1 stock split. However, looking from a slightly wider perspective we can see that the stock has been trading sideways over the past 2 months. Upward moves are limited by the resistance zone ranging below the 38.2% retracement of the recent correction, which is additionally strengthened by the upper limit of the market geometry. Support zone ranging above $105 per share is limiting moves on the downside. Stock is currently trading near the lower limit of the range and that it tends to be volatile after earnings releases, a breakout may be looming.
Source: xStation5
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