Today, Alphabet’s stock price fell by as much as 11 percent, sending the company’s value to its lowest point since March 2020, when Covid began operating in the United States. Alphabet executives have downplayed concerns over Covid, stating that the shutdowns will not affect Alphabet’s bottom line. However, investor confidence has not increased, with analysts reporting that investors are worried about the long-term effects of Covid on Google’s advertising model and the potential for Alphabet to lose ground to competitors like Amazon, who may seek to capitalize on Covid-inspired distrust of big technology companies.
The day after Alphabet’s third-quarter earnings were released on Tuesday, which missed on both the top and bottom lines, the stock fell more than 9%, making it the company’s worst day since March 2020.
The company’s most recent quarter of growth was the worst since 2013, with the exception of a brief period during the early phases of the coronavirus pandemic. Revenue growth decreased to 6% from 41% a year earlier as the company fights a prolonged downturn in online ad spending.
The company’s overall advertising revenue for the quarter was $54.48 billion, a little improvement over the prior year. Analysts had predicted a roughly 3% increase in YouTube ad revenue, but it actually decreased by about 2% to $7.07 billion from $7.21 billion a year earlier.
The firm has gotten “increasingly nervous” over the past six months as Google’s ad revenues drop, according to Bernstein analysts, who maintained their outperform rating on Alphabet shares.
“Google is an ad business first, and digital advertising is no longer a secure place to hide,” they claimed on Wednesday.
Additionally, Raymond James analysts maintained their outperform rating, citing Google Cloud’s success and expected long-term increase in ad income. The analysts said that because of Alphabet’s attempts to decrease manpower additions, they were “optimistic that margins can improve by later 2023.”
Investors following the digital advertising market should exercise caution in light of Alphabet’s move, which analysts at Needham believe will likely be bad news for Meta.
“GOOGL spoke about raising future hardware expenditures. They said in a note on Wednesday that “A lower [Return on Invested Capital] than in the past, when GOOGL was primarily a software and advertising concern, is indicated by the fact that GOOGLE and META are both spending more capX and op Ex on hardware.
Meta is anticipated to announce its findings on Wednesday after the bell.