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Alarm bells absent from Alphabet ad miss

On balance, fallout looks set to be tempered.

Alphabet’s first-quarter revenue miss hinged on lighter-than-forecast advertising vs. notable growth at Facebook, and newer ad market entrant, Amazon. Amazon’s “other” segment—mostly advertising—jumped 34% to $2.72bn in Q1. At Alphabet, non-partner ad revenue grew 15%, the slowest since 2015. Total revenues were somewhat under Wall Street’s $30.04bn expectation. Net income also suggests Google bears the brunt of a digital ad market transformation. Profits were $6.6bn vs. $9.4bn in Q1 2018. A $1.7bn EU fine dented the bottom line, whilst CFO Ruth Porat blamed FX headwinds for some of the sales miss. Hyper spending to patch-up YouTube and scale cloud also played a part. All told, Alphabet’s 8% stock slump shows markets are re-rating expectations after Google’s 12-quarter ad boom, though it looks early to call time on stellar growth. Moderate falls by rival web giant stocks back the idea of a broadening ad market rather than a narrowing one. The consequent Nasdaq 100 decline is around 1%; not quite a ‘rout’ so far.

Alphabet shares nix the clean rising trend since end-2018. The speed of the move argues against a gap fill happening soon. Instead focus should be on the 38.2% Fibonacci interval of the rise since late-December. It was flagged as sensitive by a proximate reversal early in March. There’s now a decent chance of support. If not, and should the 200-day trend gauge also cave, December’s swing low of $980 would be in play. By then though, alarm bells would be ringing across the entire market.

Alphabet ‘A’ CFD – Daily 30/04/2019 17:01:32

Source: City Index




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