Google crushes Wall Street earnings expectations, but there is a grain of salt…

November 03, 2020 11:30

On Thursday, Google reported earnings for the third quarter 2020, crushing expectations of Wall Street analyst's earnings and revenue wise.

Strong advertising growth has put Covid-19 pandemic fears in place (at least for now) and Google parent company Alphabet's stock is rising as much as 9% in after-hours trading as it eyes its All Time High. The question now is if GOOGL is a "buy", risk-reward-wise.

Earnings and revenues up. Google cloud, YouTube ads and TAC, too – what could go possibly wrong?

When looking at the outstanding numbers, Google going far up and above new All Time Highs seems likely:

  • Earnings per share (EPS) were published at $16.40 versus an estimated $11.29 expected
  • Revenue came in at $46.17 billion vs $42.90 billion expected.

In addition to that, numbers for Google Cloud, YouTube ads and Traffic acquisition costs (TAC) all came in above expectations, too, so the company beat estimates across the board, following its first-ever revenue decline in Q2.

But, as already pointed out, in our piece before the earnings last Thursday, Google/Alphabet could face some stronger headwinds, from a legal standpoint, in the months to come.

CEO Pichai briefly commented on the recent DoJ lawsuit and the allegations of Google holding monopoly power in the search market.

He said, "Regarding the DoJ's lawsuit, we believe that our products are creating significant benefits and we'll confidently make our case," while "Our company's focus remains on continuing our work to build a Search product that people love and value."

Google/Alphabet stock hasn't significantly reacted, and Google is eyeing it's All Time High around 1,730 USD. However, depending on how the developments with this lawsuit go, longer term traders should nevertheless be careful due to the potentially limited upside potential and reduced risk-reward of Google's stock on the upside.

So, how can you trade #GOOG in this environment?

The overall picture in #GOOG remains positive and bullish, technically, as long as we trade above the SMA(200) and 1,400 USD.

Still, if risk off fears around another potential Corona lockdown materialize and/or the election results in elevated volatility with, for example, a re-election of US president Trump who has attacked social media platforms recently and brought up repealing section 230 protections, an attack of this region could come sooner rather than later.

A break lower would not just darken the overall technical picture, but could also result in heavier selling pressure down to the "Corona lockdown lows" to around 1,050 USD in the months to come.

Above 1,400 USD another attempt to break to new All Time Highs remains an option. However, given the current market environment, we are considering risk-reward ratios for the long side, despite strong earnings, a little unattractive:

Source: Admiral Markets MT5 with MT5SE Add-on #GOOG CFD Daily chart (from June 06, 2019, to November 02, 2020). Accessed: November 02, 2020, at 07:45 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, #GOOG increased by 46.61%, in 2016, it increased by 1.86%, in 2017, it increased by 32.93%, in 2018, it fell by -0.80%, and in 2019, it increased by 28.18%, meaning that in five years, it was up by 158.7%.

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level than with MetaTrader 4. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modelled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
  9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Admirals An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.