Alphabet Downside Appears Limited After Mixed Quarter

Alphabet Inc. (GOOG) is trading lower by more than 4% in Wednesday’s pre-market after posting a Q1 2022 profit of $24.62 per-share, missing estimates by $0.92, while revenue increased 23% year-over-year to $68.0 billion, slightly higher than consensus. Advertising income rose a healthy 22%, with Chrome and Android OS less impacted by Apple Inc. (AAPL) privacy code that’s wreaking havoc in the social media space. The Board eased the pain of the mixed quarter by authorizing an additional $70 billion in Class A and C share repurchases.

Second Quarter Headwinds

YouTube ad income rose 15% year-over-year to $6.9 billion, now comprising just 12% of total revenue. Executives warned that advertising revenue will face tough comps in the second quarter, with the Russia – Ukraine war falling within that time slot. Alphabet suspended commercial activities in Russia following the outbreak in February. The company is scheduled to split 20-for-1 after the market close on Friday, July 15^th.

CEO Sundar Pichai did his best to talk up the report despite the shortfall, noting that “Q1 saw strong growth in Search and Cloud, in particular, which are both helping people and businesses as the digital transformation continues. We’ll keep investing in great products and services, and creating opportunities for partners and local communities around the world.” The lack of major bullet points reinforced anxiety about the tough environment for high valuation growth stocks.

Wall Street and Technical Outlook

Wall Street consensus hasn’t budged in 2022, standing at an ecstatic ‘Buy’ rating based upon 42 ‘Buy’, 7 ‘Overweight’, and 1 ‘Hold’ recommendation. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $2,900 to a Street-high $4,183 while the stock is set to open Wednesday’s session more than $600 below the low target. This horrific placement highlights the failure of analysts to see past their blind obsession with tech stocks.

Alphabet mounted the pre-pandemic peak in November 2020, entering a strong uptrend that posted exceptional gains into November 2021’s all-time high at 3,032. A selloff through the 200-day moving average got bought in January 2022, yielding a bounce to range resistance, followed by a secondary decline that also ended at range support. The stock broke down last week, confirming new resistance at the moving average and could now find support at .382 Fibonacci rally retracement at 2,260.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.