My plan for Alphabet and Google Stock is as easy as ABC

When is it good… good enough?

Answer: When the performance (relatively speaking) comes after investors have already prepared for the worst.

It’s always a good idea to let Snap (SNAP) lead things for the group.

Alphabet (GOOGL) (GOOG) Tuesday evening released its second-quarter financial results. For the period ended June 30, Alphabet reported GAAP earnings of $1.21 per share on revenue of $69.685 billion. While these top and bottom line results did not live up to expectations, the revenue reading was good enough for annual growth of 12.6% or 16% in constant currency.

Operating income of $19.453 billion (below expectations), generated by an operating margin of 28%. This is down from 31% over the same period last year.

Net income decreased to $16.002 billion from $18.525 billion (-13.6%) for the second quarter of 2021, which produced the aforementioned EPS print. That was down from $1.36.

business contribution

Google ads It generated $56.288 billion in revenue, an increase of 11.5% and slightly better than expectations.

Google search and others It generated a profit of $40.689 billion, an increase of 13.5%, exceeding a rather serious profit.

Google Network It generated $8.26 billion in revenue, an 8.7% increase, and very little failure.

YouTube ads It made $7.34 billion in profits, an increase of 5%, and it also failed.

other google It contributed $6.553 billion in revenue, up 1%, and also a loss.

Google ads And the other google are components of the reporting pane known as Google services.

Google Cloud It generated $6.276 billion in revenue, an impressive increase of 35.6%, but less than expected.

Other bets It brought in $193 million in revenue, a partial increase, and well below consensus.

sector performance

Google services It generated an operating income of $22.77 billion (+1.9%), which is a small loss.

Google Cloud It posted operating income of $-858 million (down from $591 million) as well.

Other bets Putting operating income of -1.686 billion dollars (down from -1.398 billion) together as well.

Corporate costs, not allocated Recorded operating income of $-773 million (up from $993 million) Yes, we missed it too.

chests

Alphabet paid operating cash flow of $19.422 billion. After subtracting the property and equipment purchases, the company was left with free cash flow of $12.594 billion. Both numbers were well below expectations.

Traffic acquisition costs (TAC) were $12.21 billion, which is a huge success. By the time we get to the balance sheet, Alphabet stands with a net cash position of $124.997 billion and current assets of $172.371 billion. Both numbers fell by about $15 billion over six months.

Current liabilities amount to 61.354 billion dollars. This was also lower, but only about $3 billion. This leaves her with a current ratio of 2.81, which is healthy and beyond.

Total assets come to $355.185 billion, including $25.326 billion in “goodwill” and other intangible assets. Certainly not offensive. Total liabilities minus equity come to $99.766 billion, including $14.734 billion in long-term debt.

This balance sheet, despite the enormity of nearly every scale, is simply in a rudimentary state.

prospects

Without giving too many details, CFO Ruth Porat reviewed a number of ongoing conditions affecting Alphabet’s performance and what the company is doing about them. Borat first acknowledges the difficult problems Alphabet will face for the rest of the year. Then she noted that “the decline in spending by some advertisers in the second quarter reflects uncertainty.” Alphabet expects “ongoing headwinds from fee changes and a slowdown in buyer spending that impacted results in the second quarter.”

After recognizing 3.7% headwinds related to exchange rates for the second quarter, Borat continues to tell investors to expect a greater negative impact on foreign exchange in the future. Porat also mentions that hiring will slow, and the company expects to close the Mandiant deal (MNDT) this year, and that capital expenditures will increase in 2022 versus last year with the bulk of the investment in global technology infrastructure.

Wall Street

I’ve found 15 sell-side analysts who have voiced their opinion of Alphabet since these earnings were released and have also been rated by TipRanks with either four or five stars. Every analyst rated under four stars was disqualified. Among 15 analysts, they rated Alphabet as either a “buy” or equivalent to buying their company.

The average target price across these 15 analysts is $141.07, with $160 (Brian Fitzgerald at Wells Fargo) up, and $125, up twice (Bank of America’s Justin Post and KeyBanc’s Justin Patterson). Omitting both this high and one of those lows, the average price target over the other 13 is $140.08.

My thoughts

I do not like this report. Of course it’s solid, but Alphabet is having trouble meeting expectations on the sites. I definitely don’t like the look. How did you manage? It is at least an honest, if uncertain, and practical look at the short-term future.

I came in some long stock (GOOGL). I paid an average of $104.82 per shares on Tuesday afternoon before the numbers. I also got a stifled $100/$109 long term ending Friday for a net expense of $3.90 just in case there’s a runner.

Stocks are up, but it’s not working.

Readers will see that GOOGL peaked in early January and sold out until late May. The stock hit resistance repeatedly at the perfect retracement level of approximately 38.2% of that move. There is now a firm basis for this stock between $101 and $120, having survived multiple tests on both ends of the range.

The stock appears to have failed to recover the 50 day simple moving average this morning. We’ll have to watch to see if this streak takes on a new life as resistance. This has not happened in the past. The Relative Strength (RSI) is only neutral, while the Daily Moving Average Convergence Divergence (MACD) appears almost bearish in nature.

my plan

For me, this was just a trade. With the stock trading approaching $111, I will be making dividends on the stock Wednesday morning. Since the strangle is now only $3, I will take a small loss on the options side of my trades.

If I’m interested in getting and staying on GOOGL for the long haul, I’ll need to see both the 21-day EMA and the 50-day SMA, as well as an improved RSI reading.

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