Alphabet (GOOG, GOOGL), the parent company of Google, is scheduled to report results of its third fiscal quarter after the market close on Thursday, October 25, with a conference call scheduled for 4:30 pm ET.
What to watch for:
1. EUROPE FIGHT: On October 9, Google confirmed in an email to Reuters that it has challenged a $5B fine imposed by European Union antitrust regulators, stating: "We have now filed our appeal of the EC's Android decision at the General Court of the EU." A week later, in a blog posting, Google said in part: "In July, in our response to the European Commission's competition decision against Android, we said that rapid innovation, wide choice and falling prices are classic hallmarks of robust competition, and that Android has enabled all of them...At the same time, we've been working on how to comply with the decision. We have now informed the European Commission of the changes we will make while the appeal is pending...First, we're updating the compatibility agreements with mobile device makers that set out how Android is used to develop smartphones and tablets. Second, device manufacturers will be able to license the Google mobile application suite separately from the Google Search App or the Chrome browser. Since the pre-installation of Google Search and Chrome together with our other apps helped us fund the development and free distribution of Android, we will introduce a new paid licensing agreement for smartphones and tablets shipped into the EEA. Android will remain free and open source. Third, we will offer separate licenses to the Google Search app and to Chrome." The company noted that these new licensing options will come into effect on October 29, 2018.
2. GOOGLE+ BREACH: October 8, The Wall Street Journal reported the company had exposed the private data of Google+ social network users and then dragged its feet on disclosing the discovery of the bug that gave potential access to outside developers. Following the Journal's report, Google announced on its website that it is shutting down Google+ for consumers. Google confirmed it had "discovered and immediately patched" a bug in one of the Google+ People APIs in March 2018, adding that it "found no evidence that any developer was aware of this bug, or abusing the API," and found no evidence that any Profile data was misused.
3. NEW HARDWARE: On October 9, Google announced its new Pixel 3 and Pixel 3 XL phones, which boast a second front-facing camera and come with Google Lens integrated. The same day Google also announced the launch of its new Pixel Slate tablet and accessories, including a keyboard, at $199, and pen at $99.
4. WALL STREET BULLISH: On October 17, Wedbush analyst Michael Pachter initiated coverage of Alphabet with an Outperform rating and $1,350 price target in a research note titled "Long Live the Ad King." Pachter said he expects Google to "maintain positive ad momentum" even amidst pressure from Facebook (FB) and Amazon (AMZN). The analyst also thinks cost control efforts will drive better than expected Q3 results. On October 19, Credit Suisse analyst Stephen Ju reiterated an Outperform rating on Alphabet and raised his price target to $1,500 from $1,375, telling investors that advertiser checks suggest a positive ad budget and spend environment with only modest deceleration for search and ongoing YouTube acceleration. As for Google's proposal to comply with the EU's requirements for Android bundling, Ju does not anticipate a change from the status quo as he expects the majority of handset manufacturers to voluntarily bundle Google's apps versus electing to either lose market share or take on the cost of OS/app development. More recently, KeyBanc analyst Andy Hargreaves said his checks suggest advertiser demand for Facebook and Google properties remained strong in Q3 despite regulatory concerns. This is in contrast to generally weak sentiment across the space, he noted, which he saw making the risk/reward on Facebook and Alphabet positive.