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

November 03, 2020 11:30

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

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:

GOOG CFD Daily chart

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%.


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