When Google parent Alphabet (GOOGL) reports June quarter results, investors will likely be prepared for a slowdown in digital advertising. But they may not be prepared for TikTok’s expected impact on YouTube and GOOGL stocks.
Alphabet will report its June quarter results after the market closes on Tuesday. Google shares sold off on July 22 after Instantaneous (SNAP) announced disappointing second quarter results. Snap’s earnings and revenue missed estimates as a weak ad market took its toll.
As Google’s earnings report approaches, analysts have lowered their estimates.
Analysts predict Alphabet’s revenue will grow nearly 13% to $70.2 billion, a slowdown from 62% growth the previous year. They see earnings per share dropping 6% to $1.28.
GOOGL Stock: YouTube Growth Expected to Slow
Wall Street estimates YouTube’s revenue growth will slow to 7% from 14% growth in the March quarter. In the prior year period, YouTube ad revenue jumped 84% as Google rebounded from the coronavirus pandemic.
Cowen analyst John Blackledge cut his estimate to 7.5% revenue growth for YouTube in a recent report.
“Our latest survey again highlights the potential risk to YouTube’s mobile viewing share amid TikTok’s rise,” he said. “Among 18-24 year olds, YouTube topped all platforms in Q2 when respondents were asked which platform they ‘most often’ use for mobile video. But YouTube fell to 40% of respondents from 48% in the second quarter of 2021. 2 with 22%.”
In June, Google said YouTube Shorts now has 1.5 billion monthly logged-in users worldwide. YouTube Shorts is a short video rival to TikTok. But YouTube is still testing advertising in the short form video service. It’s not profitable yet.
Google Revenue Appeal: Impact of TikTok
Google is likely better positioned than its peers for an advertising slowdown, says Bank of America analyst Justin Post.
“While further revenue reductions for advertising actions are likely, we believe Alphabet has relative revenue stability given the breadth of its advertisers,” it said in a report.
“In the earnings call, management may have to deal with tougher consumer spending comparisons/pressures, TikTok’s impact on YouTube, negative cloud margins and product pipeline to drive renewed enthusiasm for the title,” he said.
Google Stock has a below-average relative strength rating
The relative strength rating for GOOGL stocks is just 40 out of the best possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS rating of 80 or higher.
The Google stock has an accumulation/distribution rating of C-. This note analyzes a stock’s price and volume changes over the past 13 weeks of trading.
In midday stock market trading today, Google stock fell 1% to 106.82.
GOOGL stock has an IBD composite rating of 73 out of 99. IBD’s composite rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a composite rating of 90 or higher.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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