Alphabet Q4 earnings preview: What to expect?

After Alphabet crushed expectations in Q3 what can we expect in Q4 earnings and how might the share price respond.

Charts (4)

When

 
Tuesday 2nd February after the closing bell

Expectations

EPS $15.9 on revenue $53.09 billion

What to watch

The last we heard from Google parent Alphabet in Q3 earnings the tech giant beat analysts’ expectations by a wide margin. Total revenue and profits surged thanks mainly to increased advertising revenue but also down to cloud revenue beating forecasts. Youtube figures were also impressive rising 32% to $5 billion. 

Google’s cloud business has grownh quickly across the pandemic supported by the WFH dynamic. The cloud business is expected to be a significant revenue driver over the coming years and we are expecting to see a break out of the cloud business numbers this quarter for more transparency. Expectations are for healthy growth but at a slower pace in Q4.

Advertising continue to be a key focus. Google has a more diversified advertiser base than some peers so whilst it saw a larger deceleration of advertising growth in Q2, Google could well benefit more when exposure to travel & local activity picks up as the vaccine drive picks up. 

Alphabet technical analysis

Alphabet trades above its upward sloping 50 & 100 sma on the daily chart. It also trades above an ascending trend line which dates back to late October revealing an established bull trend. 

The RSI is also supportive of further gains as it is points northwards in bullish territory but below the key 70 overbought level.

After briefly piercing 1900 in Monday’s trades, the share price was unable to maintain this level and closed +3.6% at 1893. Whilst the chart paints a bullish picture, the price needs to clear the 1915 yesterday’s high before retesting 1932 its all time high and bring 2000 the psychological level into focus.

Failure to hold the higher ground could see Alphabet share price test 1800 horizontal support prior to 1775 the confluence of the ascending trendline and 50 sma. A break through here could bring 1700 into focus, with a move below this level negating the current uptrend.

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