Google Pre-earnings Analysis
Chart done on daily timeframe. The world’s most prominent search engine is set to report earnings on April 25th after market close. Alphabet, the parent company of Google, managed to grow revenue quarter over quarter in 2023, with Q3 and Q4 each growing at about 13%. Full year revenue in 2023 reached 307B, up 9% from the previous year, but the most impressive number was their 23% net income growth. Google’s strong position in the market and many avenues of revenue helped it overcome conditions that have proven to be tough for other tech stocks, but many wonder if they can do the same again this year. Analysts estimate earnings per share to fall from 1.64 last quarter to 1.49 this quarter, making the company’s targets easier to reach, but that means an earnings beat alone won’t be enough to push the stock. Buyers will likely want to see EPS come in at or above 1.64 to push Google higher upon earnings.
However even if the initial reaction from earnings isn’t positive, Google should still be considered as a bullish position. The company’s price to earnings valuation is by far one the most attractive amongst its competitors, and its free cash flow makes them one of the safest companies in terms of financial security. Google has nearly 70B of free cash flow at hand, which allows them to buy competition, spend on R&D, do stock buybacks, and maybe even introduce a dividend to keep investors happy.
Option chain analysis for this week:
Google’s options expiring on May 26th currently reflect an implied volatility reading of 91%, which translates to about a $9.00 move from the underlying stock. The direction of that move likely depends on the earnings outcome.