Alphabet Sinks Despite Earnings Beat

The harsher nuances of equities trading confronted tech bulls yesterday. Both Alphabet and Microsoft saw their stock prices plunging despite better-than-forecast headline results. Alphabet bore the brunt of the misery with the stock now down around 7% from the YTD highs seen earlier this week. On the numbers front, Alphabet posted Q4 EPS of $1.64, above the $1.59 the market was looking for. Similarly, revenues were above forecasts at $86.31 billion vs $85.27 billion expected.

Advertising Revenues Slip

However, the finer details of the report proved dissatisfying to investors. In particular, a slight undershoot in advertising revenue for the full year at $65.52 billion vs $65.8 billion expected, seemed to underwhelm investors. Overall, the company beat total revenue forecasts with a 13% YoY gain, though this was not enough to assuage the selling.

Cost Cutting Drive Continues

Looking ahead, Alphabet assured investors that it would continue to work on re-engineering its cost base. This comes on the back of the company firing 1000 employees this month with warnings that further layoffs could be expected this year. While investors have been generally pleased with news of the layoffs, the severance fees over 2024 are expected to take a toll on profitability, adding to near-term headwinds for the company. Given the run up we’ve seen in recent months, some corrective action is to be expected and while the Fed still signals forthcoming rate cuts in 2024, the bullish outlook remains intact.

Technical Views

Alphabet

The rally above the 151.21 has failed for now with price reversing sharply lower to test the 141.36 level support. While this area holds, the bullish outlook remains. Should we break below here, however, focus turns to 130.28 next. 

(Click on image to enlarge)

More By This Author:

Aussie Market Commentary
UK Market Commentary - Tuesday, January 30
Crude Oil Commentary - Monday, January 29