Why Google's Earnings Lead Big-Techs?

MaverickWealthBuilder
10-29 16:07

Obviously, Google's preemptive move to set expectations for the entire earnings week, whether it exceeds or underperforms them, can change investors' overall expectations for Q3 results.

The three most important things to watch for:

  1. YouTube performance may not lag expectations.From Nielsen's U.S. online media hours, YouTube's share is more stable relative to Netflix are more stable, in part due to YouTube Short short video brings while advantage.

    1. If it misses expectations again, or guidance is lowered, it will be a bigger drag on the stock.It could also lower investor expectations for META's Reels.

  2. Search ads are supposed to "stay solid" and are likely to "stay solid".The reason for this is still the political ad spending drive in an election year.Of course, e-commerce companies are likely to see a contraction in search ads in favor of more efficient short-form video ads.And the impact of AI search could also exceed expectations.

    1. As investors have begun to partially price in the impact of AI on search advertising over the past few months of trading, a relatively strong outperformance could fuel the stock price considerably higher.

  3. Google Cloud should grow at the same rate as last quarter's 28%, and the growth rate from AI shouldn't stop yet.

    1. But since there's no Amazon AWS or Microsoft Azure to compare it to, even if the Cloud business falls short of expectations, it's unlikely to affect investor trading.Unless it misses expectations by a significant margin, then not only will Google stock suffer, but it will drag down MSFT/AMZN and even NVDA's share price.

In addition, whether the company will announce a new buyback program, and whether the buyback amount will break the ceiling, can also determine investor sentiment.

Overall, Google is the worst-performing stock in Mag7 since the last earnings cycle, but it is top-ranked in terms of the company's repurchase amount, implying that the market's sell-off of it is almost the highest in Mag7, and also Price-in pessimistic expectations to a considerable extent.

Therefore, the strategy for Google's earnings report, will have more upward momentum than downward momentum.That is, in the event of an across-the-board beat, investors will be able to cover the portion of their expectations that were previously factored into their pessimistic expectations.

Options investors should be cautious about betting on a "limited upside" strategy.

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