The recent downturn in Alphabet Inc (NASDAQ:GOOGL) became a little more exacerbated on Thursday morning, and now GOOGL stock is starting to dip into some dangerous territory.
Pivotal Research Group analyst Brian Wieser downgraded Alphabet shares on Monday, March 20, from “Buy” to “Hold.”
Wieser’s issue was a number of large companies, including McDonald’s Corporation (NYSE:MCD), bailing out their advertisements from the YouTube video platform over lack of targeting capabilities. The specific worry is that ads will be shown alongside videos from extremist and terrorist groups, as well as anything portraying hate speech.
“We are deeply concerned that our ads may have appeared alongside YouTube content promoting terrorism and hate. Until Google can ensure this won’t happen again, we are removing our ads from Google’s non-search platforms.”
Other companies that have dropped their YouTube ads include HSBC Holdings plc (ADR) (NYSE:HSBC), GlaxoSmithKline plc (ADR) (NYSE:GSK) and Enterprise. The price target drop — from $970 to $950 — betrayed the downgrade a little, as that still implied roughly 10% upside in GOOGL stock from there.
Nonetheless, shares fell hard on the news, dropping nearly 4% between then and now, including a roughly 2% drop in Thursday’s early trading.
GOOGL shares plunged below their short-term 20-day average initially, and today have sunk below the 50-day moving average, which has provided support for shares twice since mid-December, when the stock surged through the MA.
The Relative Strength Index (RSI) has plunged to 38 — low, but still not near oversold levels.
From here, GOOGL stock risks a further drop to price support around $810 — another 3% from here. Below that would be the 200-day MA, which sits just below the $800 mark.
Looked at optimistically, though, Alphabet has been setting a small series of higher lows and higher highs since the beginning of the new year, precipitously dropping off in February before rebounding to hit new highs above $870 just last week.
This very well could be a much-needed breather in GOOGL stock — one that has dunked the forward price-to-earnings ratio to a thoroughly digestible 21, which isn’t shabby for a nearly $600 billion company that’s still projected to grow revenues by double digits this year and next.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.