Google revenue is due

Google parent company and Zacks stock ranked #2 (Buy). alphabet ((GOOGL short quoteGOOGL – Free report) ) will report third quarter results on Tuesday, October 29th^Th after market close. Below are the things you need to know about the upcoming report:

Wall Street expectations

Zacks Investment Research collects data from hundreds of Wall Street companies and prepares its consensus estimates. Wall Street analysts tracked by Zacks expect Google to earn $1.83 in the third quarter, up 18.06% year over year, on revenue of $72.85 billion (13.73% YoY growth).

Image source: Zacks Investment Research

Move implicit options

The options market can provide an indication of a stock’s possible price movement the day after earnings. Currently the options market is implying a move of plus or minus ~6%.

Course of price reaction according to EPS

Google has been in the red after earnings in three of the last five quarters. The returns were as follows:

· -5.04%

· +10.22%

· -7.50%

· -9.51%

· +5.78%

History of EPS surprise

Alphabet has surpassed Zacks Consensus Estimates in 14 of the last 20 quarters.

Image source: Zacks Investment Research

Over the past four quarters, Google has surpassed Zacks Consensus Estimates by an average of 9.60%.

Image source: Zacks Investment Research

Historical rating and evaluation compared to competitors

Google’s valuation is favorable compared to history. The stock trades at a relatively cheap price-to-earnings ratio of 23.71x. GOOGL’s P/E ratio was between ~17x and ~37x during this period.

Image source: Zacks Investment Research

Google is now the cheapest name among the “Magnificent 7” names, which include Microsoft ((MSFT Quick QuoteMSFT – Free report) ), Amazon ((AMZN short offerAMZN – Free report) ), Apple ((AAPL Quick QuoteAAPL – Free report) ), Nvidia ((NVDA short offerNVDA – Free report) ), Tesla ((TSLA Quick QuoteTSLA – Free report) ), And Metaplatforms ((META quick quoteMETA – Free report) ).

Technical levels and information

Important GOOGL levels to watch:

· Shares are rising above their 200-day moving average, which is about 3.4% lower ($161.29).

· Google’s swing low is $147.22.

· Short-term resistance lies at $169.16.

· There is an open daily price gap at $183.61 and the all-time high is at $191.75.

Note: The tortuous nature of the stock suggests that GOOGL could trigger a more implied move in options, as a decline in price leads to a rise in price.

Image source: TradingView

3 potential catalysts

Below are three things to pay attention to during the conference call:

1. Cloud: Google’s cloud business is a key driver for the company. Despite the highly competitive cloud market, Google generated cloud revenue of more than $10 billion in the second quarter, accounting for about 12% of total revenue. Google Cloud revenue grew 28.8% year-over-year and management is making the company its primary expansion segment.

2. Artificial intelligence: Google has ramped up its generative AI efforts with its large language model Gemini. Wall Street expects Google’s AI business to grow at a rapid annual growth rate of about 50% through 2030.

3. Search cannibalization comment: Advertising revenue from Google’s search business continues to make up by far the largest portion of total revenue. However, Google believes that AI will cannibalize its search business and reduce profit margins, although there is no evidence of this phenomenon so far.

What you can’t expect

The Department of Justice’s (DOJ) monopolistic action against Alphabet is unlikely to be a factor or discussed as the litigation is still ongoing.