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Tips to trade Google (and parents) quarterly earnigns – Q2 2019
Google is one of the biggest companies in the world. The company has a market value of more than $977 billion. It has more than 103k employees around the world. Over the years, the company has transformed itself from a search engine to a full-scale digital company with vast global operations.
For example, the company owns YouTube, which is one of the biggest internet company and Google Cloud, which is one of the biggest cloud computing companies in the world. It also owns Waymo, which is the biggest autonomous vehicle company in the world and DeepMind, which is one of the best-known cognitive solutions companies in the world.
All these companies, including Google, are owned by Alphabet.
Alphabet will be in the headlines this week as the company is expected to release its second quarter earnings on Thursday (here more insight). Investors expect the company will release revenues of $13.38, which will be more than double what the company reported a year ago.
The average revenue estimate for the quarter is $38.17 billion. In the same quarter a year ago, the company had revenue of more than $32.66 billion. The sales are expected to grow by 16%.
While the headline numbers will be crucial, investors will focus on a number of things.
Cloud Segment
First, they will look at the revenue and growth forecast in the cloud segment. This is one of the segments that the company is betting its future on. The company expects that the cloud revenue will reach $20 billion in 2020. However, the company does not disclose the revenue it generates from the cloud segment.
The industry is dominated by Amazon and Microsoft, which control almost 50% of the entire industry. Google, Alibaba, and IBM are trying to take market share from the two companies.
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Guidance
Investors will also focus on the guidance the company issues. The guidance number is usually important because investors like investing for the future. Therefore, if the company provides a better-than-expected guidance figure, the company’s stock will likely rise.
Today, investors expect the company’s revenue to increase $160 billion and EPS to increase to 45.67. In the coming year, investors expect the company to make more than $187 billion and an EPS of $53.
Search Business
Investors will also look at the growth in the core search business. While Alphabet is a highly-diversified company, the reality is that most of its revenues come from the advertising business. As the biggest search engine in the world, Google uses its platform to provide visibility to companies.
As more companies move to market online, Google has emerged as the biggest advertising company in the world. However, analysts and Google have warned that the segment will likely slowdown in the near future.
In this week’s release, investors will want to know what the company will do.
Finally, investors will want to know what Alphabet plans to do with its big hoard of cash. In the last quarter, the company reported that it had more than $100 billion in cash. As a result, investors will want to know whether the company plans to start issuing dividends or adding more share buybacks.
Other useful resources
- Nasdaq Index
- Alphabet Investor Relations