When Google parent Alphabet reports June-quarter earnings, investors likely will be braced for a slowdown in digital advertising. But they may not be prepared for TikTok's expected impact on YouTube and GOOGL stock.
Alphabet will report June-quarter earnings after the market close on Tuesday. Google stock sold off July 22 after Snap reported disappointing second-quarter results. Snap's earnings and revenue missed estimates as a weak advertising market took its toll.
Heading into the Google earnings report, analysts have lowered their estimates.
Analysts predict Alphabet's revenue will grow nearly 13% to $70.2 billion, slowing from the prior year's 62% growth. They see earnings per share falling 6% to $1.28.
GOOGL Stock: YouTube Growth Expected To Slow
Wall Street estimates that YouTube's revenue growth will decelerate to 7%, compared with 14% growth in the March quarter. In the year-earlier period, YouTube ad revenue jumped 84% as Google rebounded from the coronavirus pandemic.
Cowen analyst John Blackledge trimmed his estimate to 7.5% revenue growth for YouTube in a recent report.
"Our latest survey again highlights potential risk to YouTube mobile viewing share amid the rise of TikTok," he said. "Among the 18 to 24 demographic, YouTube led all platforms in Q2 when respondents were asked which platform they used 'most often' for mobile video. But YouTube dropped to 40% of respondents vs. 48% in Q2 2021. TikTok placed No. 2 with 22%."
In June, Google said YouTube Shorts now has 1.5 billion monthly logged-in users globally. YouTube Shorts is a short-form video rival to TikTok. But YouTube is still testing advertising in the short-form video service. It's not yet a moneymaker.
Google Earnings Call: TikTok Impact
Google likely is better positioned than peers for an advertising slowdown, says Bank of America analyst Justin Post.
"While more revenue cuts for advertising stocks are likely, we think Alphabet has more relative revenue stability given its breadth of advertisers," he said in a report.
"On the earnings call, management may need to address tougher comparisons/pressure on consumer spending, TikTok's impact on YouTube, negative cloud margins and product pipeline to drive renewed enthusiasm on the stock," he said.
Google Stock Has Subpar Relative Strength Rating
The Relative Strength Rating for GOOGL stock is only 40 out of a best possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS rating of 80 or better.
Google stock owns an Accumulation/Distribution Rating of C-. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
In midday trading on the stock market today, Google stock fell 0.4% to close at 107.51.
GOOGL stock has an IBD Composite Rating of 73 out of 99. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
