When Google parent Alphabet Inc. announces its fourth-quarter results on Tuesday, analysts and investors are anticipating significant growth in advertising revenue.
Earnings Expectations
Analysts tracked by FactSet predict that Alphabet will report earnings of $1.59 per share, compared to $1.05 per share in the previous year.
Revenue Forecast
In terms of revenue, analysts expect Alphabet to report a total of $85.3 billion for the fourth quarter. After removing traffic-acquisition costs, this figure is projected to be $71.2 billion, compared to $62.6 billion in the previous year.
Stock Performance
Alphabet’s stock has demonstrated an impressive 57% surge over the past 12 months, outperforming the S&P 500 index, which has climbed by 22%.
According to data from FactSet, out of the 59 analysts covering Alphabet’s stock, 43 rate it as a buy and 10 as hold, with an average price target of $158.45.
Analysts’ Insights
Industry experts highlight Google’s continued dominance in search as the primary driver of revenue growth. However, this dominance has also attracted attention from regulators and lawmakers due to concerns over advertising sales practices.
Jefferies Analyst Predicts Strong Fourth-Quarter Ad Spending for Google and Meta Platforms Inc.
In a recent forecast, Jefferies analyst Brent Thill predicts stronger-than-usual fourth-quarter ad spending for both Google and Meta Platforms Inc. Thill attributes this forecast to the healthy performance of holiday e-commerce and the companies’ transition to AI-driven ad formats.
Positive Outlook for Meta Platforms Inc.
Thill notes that Meta’s momentum has been notably better than Google’s. However, he does mention that staff cuts in 2023 may pose challenges for agencies seeking support from the company. Despite this, Thill has raised his price target on Alphabet (Google’s parent company) shares from $165 to $170.
Wells Fargo Anticipates Stable Search Environment
Ken Gawrelski from Wells Fargo expects Alphabet’s commentary on the first quarter to indicate a “stable search environment.” However, he remains cautious about the year due to regulatory risks and emerging AI developments.
Operating Margins in Focus for Evercore ISI
Mark Mahaney of Evercore ISI will be closely monitoring operating margins. He believes that this topic is still a point of debate among investors leading up to the financial report.
Mahaney expects a greater sequential step down in operating margin compared to the 40 basis points that the Street has accounted for. He attributes this expectation to Alphabet’s typical seasonality in Q4, which includes increased marketing spend, higher hardware sales, and additional costs related to content license and marketing expenditures surrounding the NFL Sunday Ticket.
Overall, these forecasts and expectations shed light on the anticipated performance of both Google and Meta Platforms Inc. in the coming quarters.
