Alphabet Inc. (NASDAQ:GOOG) expected to enjoy $3 billion in hardware profits this year

Alphabet Inc. (NASDAQ:GOOG) expected to enjoy $3 billion in hardware profits this year

Alphabet Inc. (NASDAQ:GOOG) expected to enjoy $3 billion in hardware profits this year

Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) subsidiary Google has been taking hardware much more seriously over the past two years, starting with its first-generation Pixel smartphone. Since that device’s launch, Google has aggressively expanded its first-party hardware offerings to include tablets, laptops, smart speakers, smart displays, and more, all under the leadership of hardware chief Rick Osterloh.

Consumer hardware is a cutthroat business. Growing revenue is one thing, while becoming profitable is another altogether.

Google could generate $3 billion in hardware profits this year

RBC Capital Markets analyst Mark Mahaney released a research note last week providing some fresh estimates and insights regarding Google’s hardware business. In Mahaney’s view, Google’s hardware segment has “gained critical success and are starting to gain material commercial traction.” That notion reflects the fact that while Google’s first-party devices have been garnering strong reviews among critics for quite some time, particularly in the camera department, unit volumes have historically not been all that great until recently. Google has to walk a fine line between competing with its hardware partners and also collaborating with them.

The search giant aggregates hardware revenue in its broader and vague “Other revenues” segment, which also includes businesses like Google Cloud and digital sales in the Google Play store. Other revenues jumped 30% in the third quarter to $4.6 billion and represented nearly 14% of Google’s total revenue in the first three quarters of 2018. Google doesn’t tell investors a lot when it comes to hardware, instead offering vague statements like “our hardware efforts are picking up real momentum.”

Lacking official disclosures, that’s where third-party analyst estimates come in. Mahaney is modeling for Google’s hardware business to generate $8.8 billion in revenue this year, which should translate into gross profits of $3 billion. Hardware revenue is expected to soar to $19.6 billion in revenue by 2021, yielding $6.1 billion in gross profit that year, according to Mahaney’s estimates. Google Home is expected to be the biggest contributor in 2021, representing $8.1 billion in revenue, followed by the Pixel lineup at $6.9 billion.

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 1,094.53.

The projected upper bound is: 1,113.28.

The projected lower bound is: 962.81.

The projected closing price is: 1,038.05.

Candlesticks

A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.

A morning star occurred (this is a three-candle pattern). This is a bullish pattern that often signifies a major bottom.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 29.8835. This is not an overbought or oversold reading. The last signal was a buy 0 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 49.67. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 50 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 -44. This is not a topping or bottoming area. The last signal was a buy 0 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 10 period(s) ago.

Rex Takasugi – TD Profile

ALPHABET INC C closed up 63.240 at 1,039.460. Volume was 31% above average (neutral) and Bollinger Bands were 30% wider than normal.

Open High Low Close Volume___
989.0101,040.000 983.0001,039.460 2,373,270

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 1,024.06 1,056.86 1,114.93
Volatility: 48 45 34
Volume: 2,283,038 2,036,139 1,733,968

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.

Summary

ALPHABET INC C is currently 6.8% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of GOOG.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on GOOG.O and have had this outlook for the last 5 periods.

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