Alphabet (GOOG, GOOGL), the parent company of Google, is scheduled to report results of its second fiscal quarter after the market close on Thursday, July 30, with a conference call scheduled for 4:30 pm ET. What to watch for:
1. POTENTIAL Q2 TOP-LINE WEAKNESS: Ahead of Alphabet's quarterly results, Wedbush analyst Michael Pachter told investors that he sees potential for lower-than-expected search revenue in the second quarter driven by global ad weakness and macro uncertainty, despite likely late quarter stabilization. Pachter kept an Outperform rating with a price target of $1,550 given valuation upside and an "unrivalled" collection of high-profile and omnipresent core products and platforms.
2. AD SPENDING RECOVERY: Earlier this week, Deutsche Bank analyst Lloyd Walmsley raised the firm's price target on Alphabet to $1,975 from $1,700, while maintaining a Buy rating on the shares. The analyst said he remains "optimistic" on Facebook (FB) and Google shares for the second half as he expects second quarter results and July trends to show a continued recovery in ad spending. Walmsley also sees both names as well positioned to benefit in the second half of 2020 from continued strength in e-commerce activity.
On Wednesday, BMO Capital analyst Daniel Salmon also raised his price target on Alphabet to $1,750 from $1,550, while keeping an Outperform rating on the shares. The analyst believes the company's premium Search and YouTube properties will attract advertisers back to its platform as the global economy recovers from the outbreak of COVID-19. Salmon added that Alphabet has recently turned its focus more on commerce initiatives around Shopping, Payments, AdSense and even new innovations like Shoploop, though he continues to see the company maintaining its market share of the overall digital ad spending as the economy recovers.
3. $4.5B INVESTMENT IN JIO PLATFORMS: Earlier this month, Alphabet's Google signed an agreement to invest $4.5B in India's Jio Platforms, taking a 7.73% stake in the company, pending regulatory review in India. "This is the first investment from the Google For India Digitization Fund announced earlier this week, which aims to accelerate India's digital economy over the next five to seven years through a mix of equity investments, partnerships, and operational, infrastructure and ecosystem investments," Google said in a blog post. Google and Jio Platforms entered into a commercial agreement to jointly develop an "entry-level affordable smartphone with optimizations to the Android operating system and the Play Store."
4. NEW ONLINE SHOPPING FEATURES: Last week, Bill Ready, Google's president of commerce said that, "Soon, sellers who participate in our Buy on Google checkout experience will no longer have to pay us a commission fee. And, we're giving retailers more choice by opening our platform to third-party providers-starting with PayPal (PYPL) and Shopify (SHOP). […] We've heard from retailers that they want the ability to choose their preferred services for things like payment processing, inventory, and order management. That's why we're opening our platform to more digital commerce providers, beginning with Shopify for inventory and order management and PayPal and Shopify for payment processing. So, if a retailer wants to sell directly on Google, they can get started even faster and continue using the tools and services that already work for their business. Or, if they're new to selling online, they'll be able to choose from multiple options when they sign up in our Merchant Center."
5. HOUSE HEARING: Ahead of the Subcommittee on Antitrust, Commercial and Administrative Law’s hearing entitled, "Online Platforms and Market Power, Part 6: Examining the Dominance of Amazon, Apple, Facebook and Google" with the CEOs of Amazon (AMZN), Apple (AAPL), Alphabet and Facebook on July 29, Google CEO Sundar Pichai released some prepared remarks. Pichai said the company has offered a competitive platform that has lowered prices advertisers, giving consumers more choice.
"A competitive digital ad marketplace gives publishers and advertisers, and therefore consumers, an enormous amount of choice," Pichai stated. "For example, competition in ads - from Twitter (TWTR), Instagram, Comcast (CMCSA) and others - has helped lower online advertising costs by 40% over the last 10 years, with these saving passed down to consumers through lower prices."
As the hearing was about to take place, President Donald Trump said via Twitter that, "If Congress doesn't bring fairness to Big Tech, which they should have done years ago, I will do it myself with Executive Orders. In Washington, it has been ALL TALK and NO ACTION for years, and the people of our Country are sick and tired of it!"
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