CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Alphabet shares slide as Google becomes less A B C

Article By: ,  Financial Analyst
April 24, 2018 1:55 PM

Alphabet shares slide as Google becomes less A-B-C

As usual, Alphabet’s quarterly report night bordered on surreal. The Google-owner generated first quarter revenues that were about the size of a small country’s annual GDP. Alphabet said 26% growth to $31.1bn reflected ‘global momentum’. That wasn’t particularly helpful, but to an extent the figures spoke for themselves. If advertisers have concerns about personal data use or new regulations, they didn’t act on them in Q1. That was a relief for investors, reflected in a fleeting rise of Alphabet stock after hours on Monday night. By Tuesday however, the shares were losing as much as 5%. That’s despite adjusted earnings beating forecasts and EPS jumping to $13.33 from $7.73 in last year. The stock slippage showed investors were not ready to look past the backlash against dominant technology companies just yet.

New impressions

Sparse clarification about the outlook added more unreality. Fresh guidance was sorely needed after the $744bn company deployed new accounting methods to abide by new rules. These oblige companies to publish unrealised gains and losses on investments. Since Alphabet has tentacles in dozens of start-ups, investors face fresh complications when gauging its performance. For instance, about $2.4bn of unadjusted quarterly profit was down to investments in ventures like Uber and Airbnb. Alphabet also moved some interests, like smart home appliance outfit Nest, into Google. And in the ad business, it switched emphasis to 'impressions' from a previous focus on clicks.

Less like A-B-C

This all adds up to a risk of confusion at the margin when the group needs to be as transparent as possible with regulatory, ethical and competitive challenges ahead. So investors’ unimpressed reaction to a fairly respectable Q1 makes sense. More so considering that Google underlined a commitment to splurging. Q1 expenditure almost tripled to $7.3bn from $2.5bn. Executives stressed determination to meet rising demand for YouTube, Google Assistant and data analytics tools to keep pace with rivals. In short, Alphabet is prioritizing spending over margins. Group operating margin contracted again in Q1, to 22%, down from 27% a year ago. So whilst the strong global economy offers continued ad revenue growth, regulatory uncertainty and a blizzard of spending will keep Google investors nervous. At the time of writing, the stock remained capped slightly lower for the year after 2017’s 35% advance. There’s little chance Alphabet’s outlook will get much simpler anytime soon.


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024