Will Google Stock Continue to Fall
Alphabet (GOOGL) is a holding company for over 160 subsidiary firms – the biggest being tech giant Google.
The company's shares have slid 31% year-to-date (YTD) as technology shares have suffered in a broad market sell-off. The tech-heavy S&P 500 Index (US500) has lost 23% of its value in 2022.
On 15 July 2022, Alphabet completed a 20-for-1 stock split in a bid to make its shares more accessible to retail investors, revive demand for its stock and possibly vie for a spot in the benchmark Dow Jones Industrial Average Index (US30) – a collection of 30 major blue-chip shares traded on Wall Street.
Alphabet reported earnings for the second quarter of the financial year on 26 July 2022, with profits slipping amid what CEO Sundar Pichai called "economic headwinds".
In this article we take a look at Alphabet's financial fundamentals, the latest news surrounding the company, and the Google stock forecast for the short and long term.
What is Alphabet?
On 10 August 2015, Larry Page, one of Google's co-founders, published the blog post G is for Google, in which he announced the restructuring of one of the world's biggest companies. Page mentioned the need to make the company a bit cleaner and more accountable through a new publicly traded entity. That company became Alphabet.
The new name was chosen to reflect the sentiment of 'alpha-bet' (Alpha implies investment return over benchmark).
On 2 October 2015, both classes of Google shares began trading on Nasdaq as GOOGL and GOOG fully converted into the same number of shares with the same rights, making Google a wholly owned subsidiary of Alphabet.
Alphabet remains the holding company for more than 160 subsidiary companies, the largest being Google.
On 12 September 2022, Alphabet subsidiary Google LLC completed its acquisition of cybersecurity firm Mandiant. The company is expected to further strengthen Google Cloud's security.
Google historical price analysis
The Covid-19 pandemic, and subsequent global lockdowns that saw many people work remotely, led to a steep upward trend in the Google stock price. GOOGL opened 2020 at $67.42 on 2 January 2020 and would close at $86.81 on 31 December, a 28% rise.
Growth continued into 2021, as the company reached an all-time high of $150.97 on 19 November. Although the price dipped slightly in the following days, it would remain around the $140 mark until the end of the year.
GOOGL opened 2022 at $145.05 and remained relatively steady for the first quarter. However, as macroeconomic headwinds hit tech companies, the stock began a downtrend that saw it close April at $114.11.
On 27 July 2022, the tech giant released its financial results for Q2 2022. Though the earnings missed estimates, they were better than many had feared and prompted a rebound in the stock price, which jumped 7.6% the day the results were reported.
This uptrend would continue for the next few weeks, with GOOGL seeing a three-month high of $122.30 on 15 August 2022.
However, the stock would soon resume its downtrend. On 21 September 2022 it dropped below $100 for the first time since February 2021, and just over a week later it reached a YTD low of $95.65.
As of 18 October 2022, GOOGL was trading at $100.60, down over 30% so far in 2022. The tech-heavy Nasdaq index is down 32% over the same period.
Stock fundamental analysis: Q2 financial results
2021 was a stellar year for Alphabet, with top-lines for Q4 reported at $75bn and revenue growing 32%. Pandemic-induced lockdowns increased the time people spent online. Owing to this, Alphabet's digital advertising space reflected strong growth.
However, the company seems to have lost momentum in 2022. In its Q2 2022 financial results released in July, Alphabet reported revenues of $69.6bn, a 2.4% decrease from the $68bn recorded for the previous quarter, and a 7% fall from the last quarter of 2021. Additionally, compared to Q4 2021, there has been a significant pull-back on the company's advertising revenues, from $61.2bn in Q4 2021 to $56.2bn in the latest quarter.
The $1.22 basic earnings per share (EPS) for Q2 was an 11% decrease from $1.38 year-over year (YOY).
On a more positive note, Other Bets, Alphabet's venture capital and private equity business segment, reflected solid growth. Reported revenue of $193m for Q2 2022 was an increase on Q2 2021's $192m. Other Bets houses a host of emerging companies within the realms of artificial intelligence, health and technology.
Google search also showed an increase in revenues. From $35.8bn the previous year, sales picked up approximately 13% to $40.6bn.
In response to the mixed Q2 2022 financial results, Alphabet & Google CEO Sundar Pichai said in a memo:
"The uncertain global economic outlook has been top of mind. Like all companies, we're not immune to economic headwinds."
Looking to the future, Pichai added:
"We'll be slowing the pace of hiring for the rest of the year, while still supporting our most important opportunities. For the balance of 2022 and 2023, we'll focus our hiring on engineering, technical and other critical roles, and make sure the great talent we do hire is aligned with our long-term priorities."
Google's 2022 stock split
In its Q4 2021 earnings report, Alphabet announced its decision of a 20-for-1 stock split by way of a one-time special dividend on each share of the company's Class A, Class B and Class C stock.
Stockholders recorded in the company's books at the close of business on 1 July 2022 received 19 additional shares of the same class of stock that they already held by the close of 15 July 2022.
One major reason for companies to announce stock splits is to increase the number of its shares trading in the market. As Alphabet and Google CFO Ruth Porat commented:
"The reason for the split is to make our shares more accessible. We thought it made sense to do."
The stock closed at $2,255.34 on 15 July 2022 and opened at a split-adjusted price of $112.64 on 18 July.
Looming antitrust lawsuit
On 14 July 2022, Bloomberg reported that the US Department of Justice (DoJ) could file an antitrust lawsuit against Alphabet's Google over its dominance of the online advertising market, citing sources familiar with the matter.
The division has been investigating Google's practices in the advertising technology market for the past four years, and in 2020 sued the company over its search operations. On 9 September, attorneys for Alphabet and the DoJ began laying out their arguments in preliminary hearings.
Months earlier, theWall Street Journal reported that Google had offered concessions to avoid the lawsuit, including a proposal to "spin off parts of its business that auction and place ads on websites and apps into a separate company" under the umbrella of its parent firm, Alphabet.
Google rejected allegations around its dominance of the ad tech market, claiming that the space is crowded with competitors such as Amazon (AMZN), Comcast (CMCSA) and Facebook (META).
Google stock forecast: Analysts' projections
Morningstar senior equity analyst Ali Mogharabi gave GOOGL shares a fair value estimate of $169, lowered from previous estimates of $180, following the release of the Q2 financial results.
Mogharabi attributed the results missing estimates to "ongoing economic and geopolitical challenges". He added:
"While the firm is taking steps to control costs at least through this year, with a strong cash-generating advertising business, progress toward profitability within its cloud segment, and a strong balance sheet, we think Alphabet is well-positioned to allocate more capital toward tuck-in acquisitions and investments."
Based on data compiled by TipRanksas of 18 October 2022, 29 Wall Street analysts rated the stock a 'buy' and two a 'hold'.
Their consensus 12-month Google stock price target was $141.71, varying from a low of $113 to a high of $186. The analysts' price target consensus had a possible upside of 39.25%, based on the last closing price of $101.78.
Meanwhile, 38 Wall Street analysts quoted by MarketBeat had a consensus 12-month price target of $145.90, representing a 43.78% upside on the current stock price. In all, 33 analysts rated GOOGL shares a 'buy', one a 'strong buy' and four a 'hold'. No analysts on TipRanks or MarketBeat gave the stock a 'sell' rating.
Many investment banks offered new price targets in their recent GOOGL stock forecasts, following the release of the company's financial results.
On 11 October 2022, Credit Suisse adjusted Alphabet's price target from $140 to $134, but kept its 'outperform' rating. The previous day, Morgan Stanley lowered its price target from $145 to $135, but kept its 'overweight' rating.
Google stock predictions 2022 to 2025
Due to market fluctuations, the majority of analysts only set short-term price targets. Longer-term stock forecasts are available from algorithm-based forecasting services.
According to algorithm forecaster Gov Capital's Google stock forecast as of 18 October 2022, the price could close at $111.85 by the end of 2022. The platform's longer-term GOOGL stock forecast had the price closing at $236.57 in 2023 and $395.38 in 2024. Its Google stock forecast for 2025 had the stock closing at $590.15.
Another algorithm-based forecast platform, AI Pickup, was less bearish, predicting the company's Class A shares could face volatility in the next few years. In its Google stock forecast for 2022, it predicted that the stock could average $101.03. It went on to project an average price of $204.13 in 2023, $185.28 in 2024 and $134.06 in 2025.
The service saw Alphabet stock rebounding to reach $137.52 in 2027 and $326.99 by 2030.
When looking for Google stock forecasts, it's important to bear in mind that analysts' forecasts and price targets can be wrong. Analysts' Google stock projections are based on making fundamental and technical studies of the stock's performance. Past performance is no guarantee of future results.
FAQs
Is Google a good stock to buy?
As of 18 October 2022, 29 analysts at TipRanks rated the stock a 'buy' with two recommending 'hold'. Similarly, out of 38 analysts surveyed by Market Beat, 33 rated GOOGL a 'buy', one a 'strong buy' and four a 'hold'.
Whether Google is the right stock for you depends on your trading objectives. It's important to do your own research. Your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. You should never trade more than you can afford to lose.
Will Google stock go up or down?
No one can say for sure. As of 18 October 2022, algorithm forecasters Gov Capital and AI Pickup were divided on whether GOOGL would rise or fall in the next few years. But such predictions can be wrong and have been inaccurate in the past.
Always do your own research before investing. Remember never to invest or trade with more money than you can afford to lose.
Should I invest in Google stock?
Whether you should buy, sell or hold the stock is a personal decision based on your financial circumstances, risk tolerance and portfolio composition. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision.
Keep in mind that past performance is no guarantee of future returns, and never invest money that you cannot afford to lose.
Related reading
Source: https://capital.com/alphabet-googl-stock-forecast
0 Response to "Will Google Stock Continue to Fall"
Post a Comment