Alphabet's stock down as profits dips in Q3

Friday, 01 Nov, 2019

It offers performance and brand advertising services. Alphabet's total revenue of $40.5bn beat analyst expectations. The company's stock had a trading volume of 2,594,688 shares, compared to its average volume of 1,443,527.

The company's main business appears healthy.

Overall, Baird Equity Research views Q3 as a "solid" result for Alphabet, with "fundamental trends intact, and just as important, Alphabet continues to innovate across core Search, YouTube, and Cloud, in addition to nascent areas such as Voice, Driverless and Quantum", Colin Sebastian, a Baird senior analyst, said in a research note. Google CEO Sundar Pichai responded by saying that the company wanted and meant to continue to innovate and appeared to blame some of the scrutiny on Alphabet's rivals in its newer markets being afraid of competing with it. So a volume increase at Google, but the individual advertising booking became cheaper.

Alphabet's Other Bets division, which includes long-term aspirational projects such as self-driving auto company Waymo and drone delivery company Wing, reported increased revenue of $155 million but a growing loss of $941 million.

Pachter added: "While we are confident that the company can grow revenues in line with our forecast, it is clear that management has the discretion to deliver significantly higher bottom line contribution than we have forecast".

The Alphabet results were impacted by a one-time charge of $549 million, believed to be linked to a tax settlement with French authorities.

"Alphabet continues to show strong growth in ad revenues, even as CPCs (costs per click) were down again year-over-year, showing strong continued growth in impressions and paid clicks", said eMarketer principal analyst Nicole Perrin.

Google has tried to demonstrate that its cloud-computing business is roaring, disclosing last quarter about $2 billion in revenue and saying that plans continued to hire thousands to stoke the unit's growth.

Conestoga Capital Advisors LLC trimmed its position in Alphabet Inc (NASDAQ:GOOG) by 8.9% in the third quarter, Holdings Channel reports.

Investors aren't likely to panic unless they see trouble in Alphabet's core Google business.

But spending has not been held back and higher costs loom as Google deals with clashes with regulators.

Sales at Google's "Other Revenue" section, which includes cloud and consumer hardware, were US$6.4 billion for the quarter, up from US$4.6 billion a year earlier.

Paid clicks at Google grew by 18% compared to past year. It significantly missed estimates on earnings per share, which came in at $10.12 on revenue of $40.5 billion. Alphabet had a net margin of 23.43% and a return on equity of 20.15%. The company operates through Google and Other Bets segments. It also got an additional 90-day reprieve from an export ban that would restrict its relationship with Chinese smartphone maker Huawei, one of its top partners in distributing mobile apps.

Google - along with Facebook and Amazon - has been under regulatory scrutiny lately, as antitrust officials in Washington and within most of the states are scrutinizing its impact on competition.