Alphabet (GOOGL) 4th Quarter Earnings: What to Expect

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Shares of Google parent Alphabet (GOOG , GOOGL) have opened 2019 on a strong note, climbing 7% year to date, slightly trailing the 7.5% rise for the S&P 500 Index. That’s the good news.

The bad news for investors is that the stock is still trading right where it traded a year ago after falling roughly 5% over the last 12 months. This is even though the tech giant has delivered consistent revenue growth throughout 2018. Can shares continue to rise? The company is set to report fourth quarter fiscal 2018 earnings results Monday after the closing bell.

Unlike previous quarters, the results from other business lines such as its cloud division and self-driving car unit will be bigger focus. Wall Street will take an interest in Google’s Cloud performance compared to leaders Amazon (AMZN) and Microsoft (MSFT). This is due to the fact that concerns remain about possible stricter government intervention in Google’s search business, in an effort to strengthen the security and privacy of consumers’ data.

Meanwhile, past concerns about the company’s profit margins have been an afterthought given that it now has a much strong grip on Traffic Acquisition Costs in the advertising business — the fees Alphabet pays to bring people to Google’s various properties. Investors will look to see if the company can continue to strengthen its advertising business, which in Q3, accounted for some 86% of total revenue, or a 20% increase year-over-year.

For the quarter that ended December, Wall Street is looking for the Mountain View, Calif.-based tech giant earn $10.86 per share on revenue of $38.98 billion. This compares to the year-ago quarter when earnings came to $9.70 per share on revenue of $32.32 billion. For the full year, earnings are expected to reach $41.81 per share would rise 30% year over year, while full-year revenue of the $136.49 billion would rise 23.1% year over year.

In the third quarter, the company beat bottom line projections but missed on revenue estimates, which sent the stock more than 5% lower. Chief Financial Officer Ruth Porat cited the strength of the U.S. dollar, which devalues sales in overseas markets, as reason for the revenue shortfall. There is some concern that the strength of the dollar could remain a headwind this quarter. As investors press for the company to grow its non-ad segments, Wall Street will focus on the “other revenues” category, which includes Google’s cloud business and hardware sales.

Waymo, the company’s self-driving auto segment, will draw increased attention. Google, which has been working to monetize Waymo, must show material amount of revenue for the segment. Will revenue be enough for the management to provide more transparency and breakdown Waymo’s individual performance? Assuming Google is able to deliver a top and bottom-line beat, solid cost-per-click performance and issue confident guidance, while disclosing improvements with Waymo, the tech conglomerate would have done enough to send its shares — which are on my Best Buy List for 2019 — higher.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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