2017-04-27 14:49:51 | On The Fly: What to watch in Alphabet earnings reportAlphabet (GOOG, GOOGL), the parent company of Google, is scheduled to report results of its first fiscal quarter after the market close on Thursday, April 27, with a conference call scheduled for 4:30 pm ET. What to watch for: 1. M&A OUTLOOK: Speaking in a Fortune interview published back in January, Google corporate development VP Don Harrison stated, "In 2016, we'll end up doing more than 20 deals... Whether it's cloud, AI, hardware, Google Assistant, AR, VR, I expect next year to be a lot like this [past] year [in terms of M&A]." Asked to name priority sectors, Harrison said, "We're definitely AI first. We have been focused on that and we will continue to be. Cloud is a massive focus for us, and enterprise is an area of interest for us. With hardware and the Google Assistant -- we're looking for opportunities there." 2. AD CONTROVERSY: Last month, several companies pulled their ad spending on Google's YouTube over concerns that their ads may have run alongside controversial videos. Following media reports saying that AT&T (T), Verizon (VZ) and Johnson & Johnson (JNJ) had suspended advertising from YouTube and other Google properties, PepsiCo (PEP), Wal-Mart (WMT) and Dish (DISH) said they were also suspending spending on all Google advertising except targeted search ads. According to The Wall Street Journal, Starbucks (SBUX) and General Motors (GM) also pulled their ads from YouTube, while 21st Century Fox's (FOX, FOXA) FX Networks suspended all advertising spending on Google. A few days later, Bloomberg said Ford (F) was the latest to suspend advertising on YouTube. Research firm analyst Eric Sheridan argued that any impact to Alphabet from YouTube issues were likely temporary, an opinion shared by his peer at Baird, who told investors not to "panic" yet, as Search checks were largely positive and he foresees limited bottom-line impact to Alphabet overall. However, Nomura analyst Anthony DiClemente said that he expects the "direct cumulative negative impact to revenue" could ultimately be $750M, with this year's second and third quarters shouldering the majority of the impact. 3. INCREASED AD BUSINESS COMPETITION: Earlier this month, BMO Capital analyst Daniel Salmon downgraded Alphabet to Market Perform as he believes the search engine giant will face tougher competition from Amazon (AMZN) going forward. Calling Amazon's growing ad business Alphabet's biggest headwind "since Facebook (FB)," Salmon said that Amazon's strength in ads hurts the search giant's outlook. Specifically, Alphabet's ceiling has been lowered, and the chances that it can beat expectations have also declined, Salmon stated. 4. NEW PRODUCTS, PARTNERSHIPS: Back in February, YouTube announced the rollout of its new mobile live streaming feature to all channels with over 10,000 subscribers. A few weeks later, Comcast (CMCSA, CMCSK) and Google announced a deal to launch the YouTube app on Xfinity X1 across the country later this year. On February 28, Google introduced its YouTube TV, with a cost of $35 a month and no long-term commitments. Meanwhile, Google SVP of Hardware Rick Osterloh confirmed last month that a Pixel smartphone successor will arrive sometime in 2017, according to a report by TechCrunch. On March 14, Alphabet's Google said in a blog post that users could now send and request money in the Gmail app on Android. Last week, PayPal (PYPL) announced that it is expanding its partnership with Google "to make it easy for consumers to use PayPal as a payment method in Android Pay where Android Pay is accepted, in-store, in-app and online." | |
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