Alphabet Inc. (NASDAQ:GOOG) cloud computing and wearables could help move the needle
Alphabet (NASDAQ:GOOG) stock is holding steady thanks to the announced Fitbit (NYSE:FIT) acquistion. Prior to this announcement, shares fell from their 52-week high of $1,299.31 to as low as $1250.84 per share due to an earnings miss on Oct. 28. But thanks to this potentially game-changing deal, shares are now just a few bucks shy of their high-water mark.
However, valuation-wise, GOOG stock is not exactly cheap. But compared to its FAANG peers, today’s stock price may be a solid entry point. While the company faces headwinds, Alphabet may have enough catalysts in the pipeline to get things moving.
Let’s take a closer look at GOOGL stock and see why it may be a buy today.
Recent Developments with Google Stock
As mentioned above, GOOG stock missed on earnings for the prior quarter. Diluted earnings per share for the quarter ending Sept. 30, 2019 was $10.12, below estimates of $12.71 per share. But revenue grew from $33.6 billion in third-quarter 2018 to $40.3 billion in Q3 2019. Advertising revenue soared from $28.9 billion to $34 billion. Operating income was $9.2 billion in Q3 2019, compared to $8.6 billion in the prior year’s quarter.
Material in the earnings miss was $1.5 billion in unrealized losses on equity investments. Increased operating losses for the “Other Bets” segment were another factor. This segment includes emerging businesses like self-driving vehicle startup Waymo.
Advertising makes up the majority of Alphabet’s revenue, but this cash cow may be under threat. Amazon (NASDAQ:AMZN) is gaining market share in search ad revenue. Amazon’s share of search advertising could grow to 15.9% by 2021, according to eMarketer. Google’s share could fall from 73.1% today to 70.5% in 2021.
This puts pressure on Google stock. The company’s high-margin ad business clearly faces competitive headwinds. New frontiers are necessary to keep the needle moving. One area of future growth is Cloud Computing, where Google already generates $8 billion a year in revenue. The company plans to triple its cloud sales force in order to drive additional growth.
Amazon’s AWS and Microsoft’s (NASDAQ:MSFT) Azure still lead the cloud pack. But with Google’s cash and resources, the company could make serious inroads. The Fitbit buy is another strong catalyst for GOOGL stock. With Fitbit, the company can go head-to-head with Apple (NASDAQ:AAPL) in the fast-growing “wearables” business.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 1,225.70.
The projected upper bound is: 1,351.99.
The projected lower bound is: 1,271.24.
The projected closing price is: 1,311.62.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 7 rising windows in the last 50 candles–this makes the current rising window even more bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 81.8649. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 7 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 70.28. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 7 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 158.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 7 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 17 period(s) ago.
Rex Takasugi – TD Profile
ALPHABET INC C closed up 17.060 at 1,308.860. Volume was 48% above average (neutral) and Bollinger Bands were 1% narrower than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,279.70 1,232.16 1,172.99
Volatility: 21 21 30
Volume: 1,621,386 1,327,841 1,440,993
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
ALPHABET INC C gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
ALPHABET INC C is currently 11.6% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of GOOG.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on GOOG.O and have had this outlook for the last 16 periods. Our momentum oscillator is currently indicating that GOOG.O is currently in an overbought condition. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.
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