Cho Research

About the Author Cho Research

Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

Is Alphabet’s (GOOGL) Post-Earnings Pullback a Buying Opportunity?

Alphabet (GOOGL) is tumbling nearly 8% in Tuesday’s trading session, as the internet giant missed on both revenue and earnings estimates. Some of the issues were owed to the European Commission financial charges, but also worse than expected deceleration in business revenues as well.

Alphabet stock has a lot of disappointed bulls out today as the stock plummets. According to TipRanks, out of 29 analysts polled in the last 3 months, 26 rate a Buy on GOOGL while 3 are sidelined. The 12-month average price target stands at $1,341.69, marking a nearly 13% upside from where the stock is currently trading.

According to Alphabet, “given the announcement on March 20, 2019 by the European Commission (EC) of its decision that certain contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law and the associated €1.5 billion ($1.7 billion as of March 31, 2019) fine.”

Alphabet reported revenue and dil. EPS of $36.339 billion of $9.50 respectively, which compared to consensus expectations of $37.34 billion and $10.56, representing a miss on both revenues and earnings (when also including the impact from the European Commission fine). The impact from the European Commission fine was broadly anticipated, however the weakness tied to ad monetization metrics may have raised concerns. Alphabet also referenced F/x impact for some of the topline weakness.

Paid clicks on Google properties declined by -9% and cost-per-click increased +5%. Impressions on Google Network member properties grew by +5% whereas CPMs fell by -14%. The weakness tied to network member properties, and also Google properties contributed partially to the weakness in y/y revenue comps, as Google Advertising revenue grew by 15.3% or Q1’18 $26.642 billion to $30.72 billion Q1’19.  Other business revenue grew 25.1% y/y, from $4.354 billion to $5.449 billion, and other bets remained largely flat from $150 million (Q1’18) to $170 million (Q1’19).

There wasn’t much helpful commentary tied to advertising revenues that would be indicative of some y/y acceleration in the USA whereas international could continue to grow. Perhaps, law of large numbers would be indicative of the advertising revenue deceleration, but historically Alphabet has generated revenue growth of 20%+ per quarter for quite a while now.

Source: YCharts

Some of the concerns noted by analysts on the earnings call pertained to revenue growth, which led to responses from Ruth Porat (CFO), which related to advertising inventory and advertising units changes, differences in comparative growth within YouTube’s engagement rates from prior year. And differences in results that could be tied to seasonality. When reviewing the advertising deceleration commentary, there wasn’t much commentary on how those figures could improve next quarter, or whether there would be improvements in terms of advertising metrics. Sundar Pichai, CEO also mentioned that US and Europe advertising result deceleration wasn’t based on demand issues, but rather product related features and balancing the user experience on the earnings conference call.

While, this will go down as one of Alphabet’s weaker quarterly earnings results, expectations may finally reset on the company, so revenue and dil. Earnings growth seem more beatable. Historically, Alphabet has had a number of quarters where revenue growth decelerated significantly more, such as 2012-2013, and also 2015-2016. So, weakness in revenue growth may prove somewhat temporary, as Alphabet’s dominant position in Search and various other categories like Video via YouTube results in organic ad-inventory growth along with pricing improvements.

The recent weakness is also owed to temporary set-backs related to EC related charges, so when results normalize in a couple quarters, and there’s more data to support an observable trend in deceleration, investors will have more datapoints. But, the recent quarter, and the weakness tied to advertising could prove temporary given the lumpiness in business results that Alphabet has reported historically. Therefore, the recent pullback might be an attractive set-up for longer-term investors looking for a chance to buy on a slight pullback until revenue growth starts to surprise.


Disclosure: The author has no position in GOOGL stock.


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