Zacks Investment Research


The Zacks Computer and Technology sector has tumbled in 2022 amid a hawkish pivot from the Federal Reserve, down more than 30% and widely lagging behind the S&P 500.

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A widely-known mega-cap giant in the realm, Alphabet GOOGL, is slated to unveil quarterly results on October 25th, after the market close.

Currently, the tech titan carries a Zacks Rank #3 (Hold) paired with an overall VGM Score of an A.

How does everything shape up heading into the quarterly report? Let’s take a closer look.

Share Performance & Valuation

Alphabet shares have experienced adverse price action YTD, down nearly 30% and underperforming the general market by a wide margin.

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Image Source: Zacks Investment Research

Over the past three months, however, GOOGL shares have traded in line with the general market, down just under 5%.

Zacks Investment Research
Image Source: Zacks Investment Research

While the year-to-date price action of GOOGL shares leaves much to be desired, the near-term price action indicates that sellers could be losing control.

Following the sell-off in 2022, GOOGL shares have become relatively cheap; the company’s 19.9X forward earnings multiple is well beneath its 26.7X five-year median and reflects a 6% discount relative to its Zacks Computer and Technology sector.

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Image Source: Zacks Investment Research

Quarterly Estimates

Analysts have been bearish in their earnings outlook, with two negative earnings estimate revisions coming in over the last several months. The Zacks Consensus EPS Estimate of $1.25 suggests a Y/Y earnings decline of roughly 10%.

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Image Source: Zacks Investment Research

However, the company’s top-line is in better health; the Zacks Consensus Sales Estimate of $58.4 billion indicates year-over-year revenue growth of nearly 9%.

Quarterly Performance & Market Reactions

Alphabet has struggled to exceed quarterly estimates as of late, falling short of the Zacks Consensus EPS and Sales Estimates in back-to-back quarters.

Just in its latest print, the tech titan registered a 4.7% EPS miss paired with a marginal 0.1% revenue miss. Below is a chart illustrating the company’s revenue on a quarterly basis.

Zacks Investment Research
Image Source: Zacks Investment Research

Additionally, it’s worth noting that the market has primarily reacted well in response to the company’s quarterly releases, with shares moving upwards following five of its last six prints.

Putting Everything Together

Alphabet shares are deep in the red YTD but have traded in line with the S&P 500 over the last several months, perhaps indicating that sellers have begun to lose control.

The company’s valuation multiples have pulled back significantly, with its forward P/E ratio sitting well beneath its five-year median.

Analysts have been bearish for the quarter to be reported, with estimates suggesting a Y/Y decline in earnings but an uptick in revenue.

Further, the company has fallen short of quarterly estimates in back-to-back prints. Still, the market has primarily reacted well in response to the majority of its last six releases.

Heading into the print, Alphabet GOOGL currently carries a Zacks Rank #3 (Hold) with an Earnings ESP Score of -2%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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