How resilient is Google stock (NASDAQ:GOOGL) to a business slump compared to other technology businesses amid mounting concerns about a U.S. recession? That is a crucial query for investors interested in GOOGL stock.
Google stock’s third-quarter earnings are due on October 25. Analysts see pressure on the core digital advertising business in the September quarter.
In a study, Goldman Sachs analyst Eric Sheridan stated, “We see a deceleration in Search & Other year-over-year revenue growth in Q3 vs. Q2 based on our checks (with e-commerce and travel outperforming but housing and cars flat to worse”
Alphabet’s (GOOGL stock) technical ratings have declined. On September 30, Google shares fell to a 52-week low of 95.65.
Stock Split for GOOGL
In light of a potential economic downturn, Google intends to reduce recruiting. Google intends to terminate its Stadia gaming service in January in an effort to reduce costs. In 2019, it introduced the Stadia streaming service.
In 2021, GOOGL stock increased by 65%. Google shares have decreased by around 33% so far in 2022, underperforming the S&P 500. S&P 500 prices have dropped by 25%.
After the market closed on July 15, the internet giant finalized a 20-for-1 split for Alphabet shares, the company that owns Google. Since the stock split, GOOGL stock has decreased by over 13%.
In the second quarter, Alphabet spent $15.19 billion on the buyback of Google shares, a 19% increase over the same period last year. Over the past 12 months, the market leader in internet search has repurchased $54.58 billion in Google shares.
Google Stock: Product Search on Amazon
Alphabet wants to grow its advertising business by focusing on internet searches for online retailers. It also aims to weaken Amazon.com’s (AMZN) monopoly on product searches.
Analysts predict that Google’s internet search business will do better than other forms of advertising, such as social media.
The Performance Max advertising platform, has been launched by Google. In YouTube, internet search, display, Discover, Gmail, and maps, purchasing is automated. Advertisers can manage campaigns across the whole Google ad inventory using Performance Max. According to Google, advertisers who utilize the tools increase the conversion rate of browsers into purchasers.
In 2021, Google eventually surpassed high-tech competitors long referred to as the “FANG” stocks. But despite a weak market in technology equities, the other FANGs, including Netflix (NFLX), Amazon, and Facebook parent company Meta Platforms (FB), have suffered this year.
The GOOGL stock split may eventually open the door for the tech titan to join the Dow Jones Industrial Average. Retail investors could be more drawn to Google shares.
Tough Year-Over-Year Comparisons for the GOOGL Stock?
The broad picture: As the coronavirus emergency subsides in 2022, Google shares will confront increasingly challenging year-over-year growth comparisons.
Google has postponed the phase-out of internet cookies until 2024 in order to bolster its advertising revenue in the short term. Google has announced that it will push out the phase-out of third-party cookies on the Chrome web browser to 2024 from its initial 2023 deadline. Consumers are tracked online through cookies. Google will keep testing its “Privacy Sandbox” alternative targeted ad technologies.
Early in 2022, Alphabet stated that it anticipated a “significant rise” in capital expenditures for the year, including investments in office space building and internet data center investments in computer servers.
GOOGL Stock: Expertise in Artificial Intelligence
Even though the internet search giant changed its name to the holding company Alphabet in 2015, the majority of investors still refer to the business as Google. The reorganization split Google’s main internet advertising business from so-called moonshots, including the Verily Life Sciences division and driverless cars.
Google separated its quantum computing technology division into a new business in March 2022.
The Google Cloud Platform, YouTube, and consumer hardware items are among Google stock’s artificial intelligence strengths. One stock related to artificial intelligence to keep an eye on is GOOGL.
Google showed off how it applies AI techniques to a variety of applications at a developers conference in the middle of May, including Google Workspace, Google Maps, virtual reality, and voice-based search.
GOOGL stock has left the IBD Leaderboard after a lengthy run. IBD’s handpicked list of top stocks that stand out on technical and fundamental criteria is called The Leaderboard.
Regulatory obstacles are faced by big tech stocks.
The Play Store has been an engine for revenue development as the Android mobile operating system has been included in devices sold all over the world.
In September 2021, a federal court decided that Apple (AAPL) must let creators of mobile apps to direct users to other payment options. The policies of Google are also being examined.
In 2021, Google announced that service charges at the Play Store would decrease from 30% to 15%. The action decreased income.
In October 2020, Google was the target of an antitrust lawsuit from the Justice Department. The Justice Department claimed that by monopolizing internet search and search-related advertising, Google had hurt both consumers and competitors. GOOGL shares has avoided three fines totaling $9.3 billion imposed by the European Union on antitrust grounds due to its huge cash holdings.
To avoid a second anticipated antitrust lawsuit by the Department of Justice, Google has proposed to divide portions of its ad-tech business into a new company under its parent Alphabet, according to the Wall Street Journal.
One concern is Alphabet’s capacity for major acquisitions. Amazon has been busy making purchases. Due to antitrust concerns, Google can be the subject of increased investigation.
Larry Page, a co-founder of Google, left his position as CEO of Alphabet in December 2019. He was replaced by Pichai, who oversaw the Google division. Sergey Brin, a co-founder of Google, gave up his position as Alphabet’s president.
Google’s transparency has increased under Sundar Pichai, the newly appointed CEO of Alphabet. Google started releasing financial data related to cloud computing with its fourth-quarter report in fiscal 2020. The cloud industry has not yet generated a profit.
In addition, it’s still unclear how profitable YouTube is.
Despite significant expenditures in data centers for cloud computing, artificial intelligence, YouTube, and consumer products, Google’s overall profit margins continue to be a problem.
GOOGL Shares: American Recession Coming?
As YouTube and its cloud computing division fell short of forecasts, Alphabet posted June-quarter profits and sales that fell shy of Wall Street projections. However, views edged out Google’s primary digital advertising business.
Alphabet reported an 11% drop in earnings to $1.21 per share. To $69.7 billion, gross sales increased by 16%. Google was expected to earn $1.27 per share on revenues of $69.62 billion, according to analysts. Google declared earnings of $1.36 per share on revenue of $61.9 billion a year earlier.
In the meantime, ad revenue increased 11% to $56.29 billion, just missing projections of $55.97 billion.
But YouTube’s income only increased 5% to $7.3 billion. Analysts had predicted $7.52 billion in YouTube ad income, an increase of 7%. Sales growth for YouTube decreased from 14% in the first quarter.
Google reported a 36% increase in cloud computing revenue to $6.28 billion, falling short of projections of $6.41 billion. Operating loss for the cloud segment rose to $858 million from $591 million in the same period last year.
In the second quarter, Google spent $12.8 billion on stock repurchases. The business spent $13.3 billion on the repurchasing of Google shares in the first quarter.
Business of Waymo’s autonomous vehicles
How much Google’s self-driving vehicle project Waymo and “Other Bets” like the Verily Life Sciences subsidiary should account for in value is a crucial topic for investors.
Early in 2018, several experts estimated that Waymo would be worth between $75 billion and $125 billion over the long run. However, anticipation for driverless cars has been drastically reduced.
Outside investors contributed $2.25 billion to Waymo’s investment in 2021. included the Canadian Pension Plan Investment Board, the private equity company Silver Lake, and the investment arm of Abu Dhabi, Mubadala.
Although Waymo’s value in the investment round was not disclosed by Google, sources indicated that it was just $30 billion. Now, it may be lower.
John Krafcik, the CEO of Waymo and the division’s leader since 2015, departed at the start of April 2021. He would be succeeded, according to Alphabet, by two co-CEOs named Tekedra Mawakana and Dmitri Dolgov. Dolgov served as Waymo’s chief technical officer, while Mawakana served as the company’s chief operations officer.
Waymo announced a new partnership with China’s Geely in December 2021. They intend to work together in a self-driving van with the Zeekr logo.
The success of Google’s hardware division is a different issue. It competes with Apple for smartphones and Amazon for smart home gadgets.
Cloud, hardware, and security acquisitions at Google (GOOGL Stock)
On October 6, Google unveiled two Pixel smartphones with obscenely low prices. The price of the Pixel 7 is $599. Costs for the larger Pixel 7 Pro begin at $899.
The newly released iPhone 14 series devices will face competition from the new smartphones. The starting price for the entry-level iPhone 14 is $799, while it is $999 for the Pro variants.
In January, Google completed the acquisition of Fitbit, a manufacturer of smartwatches. According to experts, the $2.1 billion acquisition should aid Google’s entry into the health and fitness sector.
Amazon and Microsoft are two formidable competitors in Google’s cloud computing industry (MSFT). To boost performance in the corporate sector, Google hired Thomas Kurian, a former leader of Oracle (ORCL).
Bulls claim that because of its emphasis on security, open source software, and data analytics, the Google Cloud Platform is gaining market share.
For $2.6 billion in cash, Google acquired data analytics company, Looker, in 2019. Looker, situated in Santa Cruz, California, employs business intelligence and data visualization capabilities in their analytics platform.
Analysts predict that Google’s cloud division may make more acquisitions in the future. Google paid $23 per share in cash for the cybersecurity company Mandiant (MNDT) as part of a $5.4 billion all-cash acquisition.
Services for cybersecurity testing and cyber incident response are offered by Mandiant. Mandiant and FireEye separated last year.
UBS anticipates that Google Workplace’s corporate productivity capabilities will help the cloud computing division gain ground in the enterprise sector.
Google said at the Goldman Sachs Communacopia conference that the Google Workspace productivity products had more than 8 million paying clients and more than 3 billion monthly active users worldwide.
Is Google Stock A Buy Right Now?
IBD Stock Checkup reports that Google’s Relative Strength Rating is merely 31 out of a maximum of 99. An RS rating of 80 or above is often seen in the finest equities.
The Accumulation/Distribution Rating of Google Stock is E. This evaluation looks at price and volume movements in stock over the last 13 trading weeks.
The ranking gauges institutional stock purchases and sales on a scale from A+ to E. E denotes substantial selling, whereas A+ denotes heavy institutional buying. Consider a C as a neutral grade.
The IBD Composite Rating for GOOGL stock is 52 out of a possible 99.
IBD’s Composite Rating creates a single, simple rating by combining five different proprietary ratings. The Composite Rating of the top growth stocks is 90 or above.
In the midst of the tech sector’s turmoil as of October 12, GOOGL stock is not in a buy zone. For it to be useful, a new foundation must be created.
How robust is the stock of Google to a business slump compared to other technological businesses, given the growing worries of a recession in the United States? This is an important question for potential buyers of GOOGL stock to consider.
On October 25, Google will release its earnings report for the third quarter. The main digital advertising sector may come under stress in the September quarter, according to the predictions of industry analysts.
In a report, Goldman Sachs analyst Eric Sheridan stated, “We see a moderation of year-over-year revenue growth in Q3 vs. Q2 based on our checks (with e-commerce and travel outperforming but housing and autos stable to worse).” This statement was made in reference to the growth of revenue from Search and Other.
There has been a decline in the technical ratings for Alphabet (GOOGL). On September 30, 2018, Google shares reached a new 52-week low price of 95.65.
GOOGL Stock Split
In anticipation of a future economic slowdown, Google aims to reduce the rate at which it hires new employees. In an effort to reduce expenses, Google has decided to end its Stadia online gaming platform sometime in January. The company introduced the streaming service known as Stadia in 2019.
GOOGL stock rose 65% in 2021. To this point in 2022, shares of Google have decreased by close to 33 percent, underperforming the S&P 500 index. The S&P 500 has dropped by a quarter of a point.
After the market closed on July 15, the internet giant successfully executed a 20-for-1 stock split for shares of Alphabet, which is Google’s parent company. Since the stock split, GOOGL share prices have dropped by approximately 13%.
During the second quarter, Alphabet repurchased $15.19 billion worth of Google shares, representing roughly a 19% increase from the same period a year earlier. Over the course of the past year, the dominant internet search engine has repurchased $54.58 billion worth of its own shares.
Google Stock: A Product Search Engine for Amazon
Internet search that is tied to e-commerce is one of the strategies that Alphabet plans to implement in order to grow its advertising business. At the same time, it seeks to challenge the preeminent position held by Amazon.com (AMZN) in the field of product search.
Analysts predict that Google’s internet search business will do better in the next years compared to alternative advertising formats, such as social media.
Google’s Performance Max advertising platform has been made available to users. Purchasing is made easier across a variety of platforms, including YouTube, internet search, display, Discover, Gmail, and maps. Advertisers are able to manage their campaigns across all of Google’s ad inventory with Performance Max. According to Google, advertisers that utilize the tools successfully turn more consumers into purchases.
In 2021, Google ultimately surpassed its high-tech competitors which were once known as the “FANG” stocks. In contrast, the other companies in the FANG group, including Facebook’s parent company Meta Platforms (FB), Amazon, and Netflix (NFLX), have had a difficult year so far due to the bear market in technology equities.
The GOOGL stock split may, in the long term, make it possible for the technology behemoth to become a component of the Dow Jones Industrial Average. It’s possible that regular investors may find Google shares more appealing.
Comparisons to Last Year’s Performance on the GOOGL Stock:
The larger picture is that year-over-year growth comparisons for Google shares in 2022 are going to be more difficult as the coronavirus outbreak begins to wind down.
Google has decided to defer the elimination of internet cookies until 2024 in order to provide a short-term boost to its advertising business. Google has announced that it would extend the phase-out of third-party cookies on the Chrome web browser until 2024 after having initially delayed the deletion of these cookies until 2023. Cookies are used to monitor users’ activity on websites. Google has stated that it will keep testing its alternative targeted advertising technology, which is known as “Privacy Sandbox.”
Alphabet stated at the beginning of 2022 that it anticipated a “significant rise” in its capital spending in 2022. This was due to investments in computer servers located in internet data centers as well as the development of office space.
Artificial Intelligence Capabilities Exhibited by GOOGL Stock
Even though Alphabet was established as the holding company for the internet search engine Google in 2015, the majority of investors still refer to the business by its former name, Google. As part of the company’s reorganization, Google’s main internet advertising business was split from the company’s so-called moonshot projects, which include driverless cars and the Verily Life Sciences subsidiary.
In March of 2022, Google separated its technology branch devoted to quantum computing into its own independent firm.
The artificial intelligence capabilities that Google stock possesses are particularly strong in digital advertising, the Google Cloud Platform, YouTube, and consumer hardware items. The stock of artificial intelligence company GOOGL is just one to keep an eye on.
In the middle of May, Google held a conference for developers where the firm presented how it employs artificial intelligence techniques in a broad variety of applications, such as Google Workspace, Google Maps, virtual reality, and voice-based search.
The GOOGL stock price has finally been knocked off the IBD Leaderboard after a lengthy run. IBD has compiled a list of prominent stocks that excel in both technical and fundamental measures and has titled this list the Leaderboard.
The Major Technology Stocks Will Be Affected by Regulatory Headwinds
The Play Store has been a driver of revenue growth because to the fact that the Android mobile operating system is included in devices that are sold all over the world.
Apple (AAPL) was ordered by a federal judge in September 2021 to comply with the ruling, which states that the company must let mobile app developers to direct customers to payment methods offered by third parties. The policies of Google are also being investigated at this time.
Google has stated that it would reduce service costs at its Play Store to 15% from 30% in the year 2021. The decision led to a decrease in revenue.
The antitrust action against Google was initially launched by the Department of Justice in October of 2020. The Department of Justice has asserted that Google’s monopolization of internet search and advertising that is tied to searches has been detrimental to both consumers and other businesses. GOOGL stock has been able to shrug off three antitrust fines totaling $9.3 billion that were assessed by the European Union. This is possible due to the enormous cash reserves that GOOGL possesses.
According to a report from the Wall Street Journal, Google has reportedly proposed separating certain aspects of its ad-tech business into a new subsidiary that would operate under the umbrella of its parent company, Alphabet. This would be done in an effort to head off a second anticipated antitrust lawsuit from the Department of Justice.
One concern involves Alphabet’s capacity to make significant purchases. Amazon has been quite busy recently, completing a number of purchases. But because of antitrust concerns, Google may be subject to even greater scrutiny.
Larry Page, a co-founder of Google and Alphabet, resigned as CEO of the company in December of 2019. Pichai, who was the head of the Google unit, succeeded him as the leader. Sergey Brin, one of the co-founders of Google, has resigned from his position as president of Alphabet.
Under the leadership of Alphabet’s new Chief Executive Officer Sundar Pichai, Google has become more open. With its report for the fourth quarter of fiscal year 2020, Google started providing financial data relating to cloud computing. The cloud computing industry has not yet produced a profit.
In addition, there is no clear indication of how profitable YouTube is.
In spite of the company’s significant expenditures in data centers for cloud computing, artificial intelligence, YouTube, and consumer products, Google’s overall profit margins continue to be a source of concern.
Is There Going to Be a Recession in the United States?
As a result of YouTube and Alphabet’s cloud computing division falling short of forecasts, Alphabet announced earnings and sales for the quarter ending in June that fell short of Wall Street projections. However, Google’s primary business of digital advertising gained a few more views.
Alphabet said that its earnings decreased by 11%, coming in at $1.21 per share. The increase in gross sales was 16%, reaching $69.7 billion. Earnings for Google were forecast to come in at $1.27 per share on revenue of $69.62 billion by market analysts. Google had posted earnings of $1.36 per share on revenue of $61.9 billion a year earlier.
Meanwhile, income from advertising increased by 11% to $56.29 billion, just above analysts’ predictions of $55.97 billion.
Despite this, YouTube’s income increased by just 5% to reach $7.3 billion. Analysts predicted that YouTube will generate ad income of $7.52 billion, or a 7% increase. The 14% increase in sales that YouTube saw in the first quarter was followed by a slowdown.
Google said that its income from cloud computing increased by 36% to $6.28 billion, falling short of analysts’ expectations of $6.41 billion. The operating loss for the cloud division climbed to $858 million from $591 million over the same time period the previous year.
During the second quarter, Google repurchased 12.8 billion dollars’ worth of its own shares. The corporation repurchased $13.3 billion worth of Google shares during the first quarter of the fiscal year.
The Waymo Business Regarding Autonomous Vehicles
The extent to which Google’s self-driving vehicle project Waymo and “Other Bets” like the Verily Life Sciences subsidiary should be included into value is one of the most important questions for investors to consider.
At the beginning of 2018, a number of analysts predicted that Waymo’s long-term valuation will fall somewhere between the range of $75 billion to $125 billion. However, the expectations of driverless cars have been significantly scaled back.
In 2021, Waymo was successful in raising $2.25 billion in capital from a variety of external investors. among them are the private equity company Silver Lake, Canada Pension Plan Investment Board, and Mubadala Investment Arm of Abu Dhabi.
Despite the fact that Google did not reveal Waymo’s valuation during the fundraising round, sources indicated that it was just $30 billion. It’s possible that it’ll go lower now.
Waymo CEO John Krafcik, who has been serving in that capacity since 2015, tendered his resignation at the beginning of April 2021. Alphabet said that Tekedra Mawakana and Dmitri Dolgov will take over as the company’s co-CEOs in his stead. Previously, Mawakana served as Waymo’s chief operations officer, and Dolgov held the position of Waymo’s chief technical officer.
Waymo made the announcement of their new partnership with the Chinese company Geely in December of 2021. They intend to work together in a vehicle that drives itself and is branded with the Zeekr name.
Another issue that has to be addressed is how well Google’s hardware business is doing. It is competing with Apple in the smartphone market and with Amazon in the market for smart home goods.
Cloud, Hardware, and Security Acquisitions Represented by GOOGL Stock
On October 6, Google announced two new Pixel smartphones with aggressive pricing points. The Pixel 7 has a starting price of $599. The larger Pixel 7 Pro may be had for a starting price of $899.
The new smartphone models will compete with the iPhone 14 series devices, which were only released lately. The starting price for the iPhone 14 is $799, while the starting price for the Pro variants is $999.
Additionally, the month of January saw the completion of Google’s acquisition of the wristwatch manufacturer Fitbit. Analysts believe that the acquisition, which cost Google $2.1 billion, will assist the company in penetrating the health and fitness business.
The cloud computing division of Google, on the other hand, is up against Amazon and Microsoft, two formidable competitors (MSFT). In order for Google to boost its success in the corporate sector, the company recruited Thomas Kurian, a former executive of Oracle (ORCL).
The bulls believe that Google Cloud Platform is gaining market share because of its focus on data analytics, open source software, and security.
In 2019, Google paid a total of $2.6 billion in cash to acquire the data analytics company Looker. The analytics platform offered by Looker, which is headquartered in Santa Cruz, California, makes use of business intelligence and data visualization capabilities.
According to experts, Google may be planning further acquisitions to bolster its cloud business in the near future. In an all-cash transaction worth $5.4 billion, Google has purchased the cybersecurity company Mandiant (MNDT) for $23 per share.
Services include testing for cybersecurity and responding to cyber incidents are offered by Mandiant. The year before last, FireEye broke away from Mandiant.
UBS anticipates that the business productivity features provided by Google Workplace will provide a boost to the cloud computing unit inside the enterprise sector.
According to information presented by Google at the Goldman Sachs Communacopia conference, the Google Workspace productivity tools have more than 3 billion monthly active users around the globe and more than 8 million paying clients.
Should You Buy Google Stock Right Now?
According to IBD Stock Checkup, Google’s Relative Strength Rating is just 31 out of a maximum of 99 points. This is despite the fact that Google is one of the most valuable companies in the world. The RS rating of 80 or above is often associated with the finest stocks.
The Accumulation/Distribution Rating for Google stock is now at an E. This rating takes into account the price and volume fluctuations that have occurred in a stock during the course of the most recent 13 weeks of trade.
The grade uses a scale that goes from A+ to E to assess the purchasing and selling activity of institutional investors in a stock. A+ indicates substantial purchasing from institutions, while an E indicates heavy selling. Consider the grade of C to be an average.
The IBD Composite Rating for GOOGL stock now stands at 52 out of a maximum of 99 points.
IBD’s Composite Rating is an easy-to-use rating that combines five different proprietary criteria into a single rating. A Composite Rating of 90 or higher is typical of high-quality growing companies.
GOOGL stock is not in a buy zone as of October 12 due to the volatility in the technology sector. In order for it to become actionable, a new foundation must be established.
Featured Image- Megapixl @ Miluxian
Author Valerie Remorosa