Oct 24, 2023

Google stock reversed some of last week’s losses ahead of its third-quarter earnings report.

goog daily chart

GOOG: Daily Chart

GOOG was trading at $138.79 on Monday after seeing a drop last week, and resistance sits at $142 for the tech firm.

Google’s parent firm, Alphabet, is scheduled to report its third-quarter results on October 24, after the market closes. The performance of Google Search and Google Cloud and YouTube’s advertising revenue are likely to be the key drivers for the stock in this release. Wall Street is optimistic about Alphabet’s outperformance, with analysts expecting the company to post earnings of $1.45 per share on revenues of $75.99 billion.

In the previous year’s release, the company reported diluted earnings of $1.06 per share on revenues of $69.09 billion. Alphabet has outpaced earnings estimates in four out of the past eight quarters.

Meanwhile, the continuing hype around artificial intelligence (AI) tools could have boosted Alphabet’s Q3 results. Google’s generative AI chatbot Bard is already installed in most of its products, with additional ad revenue for the tech giant. A premium subscription priced at $30 per month was also launched in direct competition with Microsoft.

Jefferies analyst Brent Thill kept a buy rating and $165 target on GOOG, and he expects a slight Q3 beat from Alphabet. The analyst noted Alphabet’s performance drivers as a modest acceleration in ad revenue growth, search dominance, the popularity of YouTube, the dominance of Google Cloud, and the ongoing AI buzz.

Also, TD Cowen analyst John Blackledge had a buy rating on Google stock and lifted his price target to $160 (17% upside) from $150. Cowen’s survey results showed that YouTube may return to double-digit growth in Q3. He added that Google Search spend growth is expected to accelerate, thanks to better pricing. The analyst is also positive about the Cloud franchise, which is one of the most popular service providers in the space.

Google’s shares caught an early-week rebound but will need to see something good in its earnings to retest the recent highs. With Microsoft releasing the same day, it could be an AI tool comparison.

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