Alphabet, the parent company of Google, has seen its stock price tumble more than 6% in pre-market trading Thursday morning, following news that the company would be pulling out of China. The drop was so precipitous that Alphabet’s shares briefly entered bear market territory, meaning they’re now down by 20% or more from their 52-week high, according to CNBC. The dip will be Alphabet’s worst day since March 2020, when Covid shutdowns started in the U.S., leading to the loss of millions of jobs across the country.
After the business published third-quarter earnings on Tuesday that failed on the top and bottom lines, shares of Alphabet fell more than 6% on Wednesday, the worst day for the company since March 2020.
Except for a brief period during the early stages of the coronavirus epidemic, the corporation posted its poorest quarter of growth since 2013. As the business battles a persistent decline in online ad expenditure, revenue growth dropped to 6% from 41% a year earlier.
During the quarter, the firm recorded $54.48 billion in total advertising revenue, a small increase over the previous year. Analysts had anticipated a rise in YouTube ad income of approximately 3%, but instead it fell by nearly 2% to $7.07 billion from $7.21 billion a year earlier.
Although Bernstein analysts kept their outperform recommendation on Alphabet shares, they noted that the business has grown “increasingly uneasy” over the past six months as Google’s ad sales slow.
They said on Wednesday that “Google is an ad business first, and digital advertisements is no longer a secure place to hide.”
In addition, Raymond James analysts kept their outperform recommendation, noting Google Cloud performance and anticipated long-term ad revenue growth. The analysts said they were “optimistic that margins can increase by later 2023” due to Alphabet’s efforts to reduce headcount additions.
Investors paying attention to the digital ad industry should be wary of Alphabet’s announcement, which analysts at Needham said is probably negative news for Meta.
“GOOGL discussed increasing future hardware investment. In a note on Wednesday, they stated that “GOOGLE and META are both spending more capX and op Ex on hardware, which indicates poorer [Return on Invested Capital] than in the past when GOOGL was mostly a software and advertising firm.
Wednesday after the bell, Meta is expected to release its results.