Alphabet (GOOGL) Tanks on Revenue Miss
Alphabet Inc. (GOOGL) tumbled well more than 8% at its worst on Tuesday. Driving this stock plunge was the company’s earnings release after the market close on Monday. The report revealed substantially slowing sales growth in the first quarter compared to previous quarters and estimates. Despite higher-than-expected earnings, Alphabet announced its slowest overall sales growth in several years.
Alphabet’s Advertising Revenue Growth Disappoints
This slowdown was driven largely by the company’s major source of revenue – advertising. Alphabet reported that ad sales rose a relatively tepid 15% in its fiscal fourth quarter, down from 24% in the same period a year ago. As a comparison, previous quarters have seen consistent revenue growth at or above 20%. Making matters even worse, Alphabet executives were vague and, by some accounts, confusing when explaining the slowing sales growth. This confusion likely exerted even more pressure on the stock.
GOOGL Chart Breakdown
The chart above clearly shows Tuesday’s large gap down from what was a new record high just short of $1300 per share on Monday. Prior to the drop, GOOGL had been up 24% year to date and was entrenched in a sharp uptrend from the late-December lows. After the drop, the stock has reached all the way back down to its 50-day moving average.
What May Happen Next for GOOGL?
Where might the stock go from here? Tuesday’s plunge may well have been overdone. But a slowdown in revenue is a clear fundamental signal that something may be seriously wrong or that Alphabet’s business may be taking a turn for the worse. This is especially the case since the company relies so heavily on advertising sales.
If the stock remains below its 50-day moving average, the next dynamic target is around the key 200-day moving average. And if that level is unable to hold, Alphabet will likely have significantly further to fall.
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Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.
Chief Market Strategist at The Technicals
With more than two decades of experience as an equity analyst for several major research firms, Don has covered individual stocks (both technically and fundamentally) across a wide variety of sectors and industries, including tech, financial, and retail. He has been quoted regularly in key financial media like Bloomberg and Reuters. Contact Don