Alphabet will reveal its second-quarter earnings tonight after the close in New York, at 9pm (UK time).

Alphabet, the parent company of Google, is expected to report adjusted earnings per share (EPS) of $10.34 for the second-quarter. Sales are expected to come in around $25.6 billion, up 19% year-on-year, and up 3.9% from $20.1 billion last quarter – which beat expectations of $19.75 billion. 

In the first-quarter, advertising revenue and net income rose by 18% and 29% respectively on a year-on-year basis. The company stated that revenue from advertising from all their regions around the world increased when compared with the first-quarter last year. A geographically diversified revenue stream is important as it reduces the risk of becoming too dependent on certain countries.

The costs of traffic acquisitions on Google network came in above estimates in the last quarter. Alphabet’s ‘Other bets’ has seen some projects scrapped. The division has enjoyed a 48% jump in revenue for the first three months of the year, but still saw its quarterly losses widen year-on-year.

The driverless cars division Waymo and the life sciences business Verily are certainly doing some interesting work, but investors will want to either see a narrowing of the loss, or at least major strides to profitability being achieved. Google has been a roaring success, but shareholders won’t remain silent forever if the ‘Other Bets’ projects remain in the red.

Alphabet saw its global headcount increase by 15% in the first part of the year, and that was largely down to hiring for the cloud business. The company saw revenue from hardware, software and cloud computing jump by 50% in the first three months. It may not be as glamorous as driverless cars, but it is a respectable sales stream, and it helps close the gap with Amazon Web Services.

Alphabet shares have been trading at a 25.5 P/E, above its 15.6% long-term growth rate for a PEG (P/E to growth) ratio of 1.6, pricey but not dangerously expensive.

Alphabet C shares

The stock is eyeing the record high that was created in June of $988, and the momentum is to the upside. Bulls will be looking to the $1000 mark. Pullbacks could find support at $895.

Alphabet A shares

The share price is approaching the all-time high that was reached in June of $1008. The momentum is with the bulls. Should the stock drift lower, we could see support come into play at $915. 

 

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