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NASDAQ: Alphabet share price and Q4 earnings results preview


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What to expect and how to trade Alphabet’s upcoming results

What to expect and how to trade Alphabet's upcoming results | IG South  Africa

Source: Bloomberg

 

 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 31 January 2023 

When are Alphabet's results expected?

Alphabet is set to release its fourth quarter (Q4) 2022 results on 02 February 2023. The results are for the fiscal quarter ending December 2022.

What is ‘The Street’s’ expectation for the Q4 2022 results?

According to Reuters Eikon expectations for the upcoming results are as follows:

Revenue of $75,694 billion : +0.49% year on year (YoY)
Earnings per share (EPS): $1.18 (-29.66% YoY)

With about a third of US companies having reported their earnings so far and these having been lacklustre, all eyes are on major technology stocks such as Alphabet, one of the world’s most widely held stocks, to see whether these can recover some of their dire 2022 losses.

After all, not just FAANG stocks are technically oversold and with asset allocators being the most underweight US stocks since October 2005, a huge amount of money may soon flow back into equities.

Bofa chartSource: BofA Global Fund Manager Survey


If earnings by the likes of Alphabet disappoint, however, they are likely to drag global stock markets lower with the strong January rally swiftly coming to an end.

Despite a close to 15% January rally in the Alphabet share price, the stock is still down over 11% on a six-month period, over 12% on a nine-month period and down over 28% compared to a year ago.

How to trade Alphabet into the results

With double-digit growth in most areas and year-on-year top line growth as well as solid forward earnings before interest, taxes, depreciation and amortisation (EBITDA) and Earnings per Share (EPS) growth, despite an expected dip in EPS to $1.18 in the fourth quarter of 2022, Alphabet shares may prove to be an astute long-term buy at currently discounted levels even if the stocks maintains its premium valuation.

What will be of interest to investors is whether the tech giant, which dominates the global online search market with around an 80% market share, is seeing continued growth in its daily number of users, online advertising services, its Android smartphone operating system with a global market share of all phones bought of over 70%, and other revenue streams.

Refinitiv data shows a consensus analyst rating of ‘buy’ for Alphabet – 13 strong buy, 31 buy and 4 hold - with the median of estimates suggesting a long-term price target of $123.70 for the share, around 28% above where it is currently trading (as of 31/01/2023).

ALPHABET analystsSource: Refinitiv


IG sentiment data shows that 93% of clients with open positions on the share (as of 31 January 2023) expect the price to rise over the near term, while 7% of clients expect the price to fall.

53% of clients who trade the share sold it this month and this week.

ALPHABET client tradingSource: IG


Alphabet technical view

Alphabet’s share price, which in early January traded close to its October low at $83.34, surged by nearly 15% to its current January high at $100.32, made last week, before stalling again ahead of its fourth quarter earnings out on Thursday.

From a technical perspective the long-term picture for the Alphabet share price remains negative since it trades within its 2022-to-2023 downtrend channel and, more importantly, since no rise and weekly chart close above the November high at $102.25 has so far been seen.

If this were to occur over the coming weeks and the key resistance area between the June and July 2022 lows and the October 2022 high at $104.07 to $105.05 to be exceeded as well, a significant long-term bottoming formation would be formed, however, which may spell the end of the stock’s bear market.

Weekly Alphabet chart:

Weekly ALPHABET chartSource: Tradingview


Last week Alphabet twice tried and only very briefly managed to overcome the psychological $100 barrier before slipping back each time it did so.

Nonetheless, the short-term uptrend seen since early January remains intact while last week’s low at $93.76 hasn’t given way. If so, one would have to allow for the early January high at $91.05 to be retested as well.

Daily Alphabet chart:

Daily ALPHABET chartSource: Tradingview


Key support is made up of the November-to-January lows at $85.94 to $83.34. As long as it holds, the possibility of a major long-term bottom being formed, remains in play.

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