Sarah Brady
Updated on: October 11, 2024 3:50 pm GMT
Alphabet Inc. (GOOG), the parent company of Google, has recently attracted significant attention as its stock has tumbled 35% from its all-time highs, placing it in bear market territory. This sharp decline has raised questions among investors about the company’s future performance and whether it is a good time to buy into the stock. This article examines the current status of Alphabet’s stock, its earnings forecasts, and the external pressures it faces.
Current Market Position and Stock Performance
Alphabet’s shares closed at $157.53, surpassing its eight-day simple moving average (SMA) of $153.17, indicating a short-term bullish signal. However, the stock remains below its 20-day SMA of $159.68 and 50-day SMA of $168.01, both of which suggest ongoing bearish trends. The technical indicators also paint a mixed picture; the Moving Average Convergence Divergence (MACD) stands at -4.01, further pointing to bearish sentiment, while the Relative Strength Index (RSI) is at 45.74, indicating that the stock is neither overbought nor oversold.
The Bollinger Bands, with recent ranges between $149.03 and $171.41, show the stock trading towards the lower band, signifying potential continued selling pressure ahead.
Factors Influencing Alphabet’s Stock
Several crucial factors contribute to Alphabet’s current stock dynamics, including earnings projections, competitive pressures, and external regulatory issues.
Earnings Forecasts
In assessing Alphabet’s prospects, analysts focus on the company’s earnings forecasts. For the current quarter, Alphabet is expected to deliver earnings of $1.83 per share, representing a year-over-year increase of 18.1%. The forecast for the current fiscal year stands at $7.63 per share, a year-over-year change of 31.6%, which remains unchanged over the last 30 days. For the next fiscal year, the anticipated earnings of $8.64 indicate a growth of 13.2%.
Alongside earnings, sales forecasts are also promising. The consensus sales estimate for the current quarter is $72.78 billion, a 13.6% increase year-over-year. Projections for sales in the current and next fiscal years are $292.21 billion and $325.72 billion, respectively, reflecting growth rates of 13.9% and 11.5%.
The Zacks Rank tool, which evaluates earnings estimate revisions, currently rates Alphabet’s stock as a #3 (Hold), suggesting that it may perform in line with the broader market tendencies in the near term.
External Pressures
Despite its strong earnings outlook, Alphabet has been facing significant external pressures that impact investor sentiment. Notably, the ongoing antitrust lawsuit filed against the company by the U.S. Department of Justice underlines concerns about regulatory scrutiny and potential future penalties. Similar legal challenges are emerging in Europe, further adding to the uncertainty surrounding Alphabet’s business operations.
Additionally, Alphabet’s aggressive investments in artificial intelligence (AI) have raised alarms about short-term capital efficiency. As the tech giant prepares to roll out new AI initiatives, investors are cautious about the immediate financial implications of these expenditures compared to the longer-term potential benefits.
Comparative Valuation
Understanding Alphabet’s valuation relative to its competitors is crucial for investors. The evaluation involves analyzing metrics such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF). A review of these metrics indicates that Alphabet is currently trading at par with its peers, receiving a Zacks Value Style Score of C, suggesting it is neither overvalued nor undervalued in comparison to the market.
Analyst Insights
Analysts at Zacks highlight the correlation between earnings estimate revisions and stock price movements. As earnings estimates solidify, substantial shifts could influence investor interest. Historically, stocks with rising earnings estimates tend to attract buyers, leading to price increases. However, with Alphabet’s current challenges and a bearish trend, caution remains warranted.
In light of these factors, both the bullish short-term signals and the overarching bearish sentiment underline the complex landscape for Alphabet shareholders.
Conclusion
Alphabet Inc.’s stock has both exciting possibilities and some risks. The company’s earnings predictions look good, but there are outside challenges, especially from rules and big spending on AI, that create some doubt. Right now, the stock has a hold rating, so investors should be careful and keep an eye on how things change in the market and with regulations. How well Alphabet does in keeping its earnings stable and dealing with outside pressures will be very important for its stock price in the future.
