It’s officially earnings season and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is set to kick off the week for large-cap stocks. But while a well-received report can offer investors quick and above-average returns, is holding Google stock through the report a smart idea given today’s amplified risks? Let’s dive into Street expectations and what’s happening off and on the stock’s chart to provide a stronger risk-adjusted determination.
This earnings season has been a mixed bag offering big losers and big gainers in some of the market’s largest capitalization and recognizable companies. Recent upside reactions in Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA) and Apple (NASDAQ:AAPL) are testaments to the bullish power of earnings.
At the same time, post-earnings stock moves in Facebook (NASDAQ:FB) and Electronics Arts (NASDAQ:EA) or Caterpillar (NYSE:CAT) offer comparable painful losses for investors holding shares through a company’s announcement. Now and on the docket Monday evening is Alphabet’s fourth-quarter confessional.
By the numbers Alphabet is forecast to produce profits of $12.76 according to Zacks analysts. Earnings are essentially flat from 2019’s same quarter result of $12.76. However, Google stock’s “whisper number” is more bullish. That forecast calls for earnings of $13.05 per share. Profit growth for the company is expected to pick up in 2020 though with consensus views calling for an increase of 20%.
Regarding Alphabet’s top-line, core revenues for the fourth quarter are anticipated to grow 21% on sales of $38.441 billion.
Since reporting third quarter results, shares have rallied roughly 11%. Still, investor reaction to Alphabet earnings wasn’t initially well received as the stock fell 2.20%. And the immediate response from investors over the preceding three quarters saw varied price swings of 9.62%, -7.52% and 0.92% despite shares gaining a solid 29% in 2019.
Unsure, what to think?
There’s more than just the numbers to consider when determining whether to hold Google stock through earnings too. Front and center, after a brief attempt at shaking off a fast-growing coronavirus this past week, sentiment on Wall Street has quickly turned toward a risk-off environment. It’s an important consideration.
Without over-complicating matters, the chance for a positive earnings reaction in Alphabet is reduced until macro conditions improve. Additionally, given an Alphabet price chart that’s showing a bit of difficult historical precedent, the downside risk in the stock appears to be a more compelling odds-on favorite in the near-term.
Looking At the Weekly Chart for Google Stock
Source: Charts by TradingView
Google stock has enjoyed a nice rally. But that rally may be its downfall … at least in the short-term. As the provided detailed weekly chart illustrates, shares have shown a knack for moving into larger price corrections following challenges of well-watched century levels. Initial and even second tests of $1,000, $1,200 and $1,300 have resulted in larger backing and filling patterns.
Furthermore, Google’s recent challenge of all-time-highs at $1,500 coincides with a conservative measured move of $200 out of the stock’s mid-2018 to mid-2019 corrective base. What’s more, as of last week shares have confirmed a weekly chart candlestick topping pattern out of an overbought position based on the stock’s Bollinger Band and stochastics indicators. There’s strong evidence would-be Alphabet buyers are better off waiting for lower prices as part of a likely deeper correction.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.