Google (Alphabet) shares smashed on surprise drop in ad revenue
WASHINGTON. After wallowing on the wrong side of flatline Monday, Mr. Market gave us a pleasant surprise by closing on a modestly positive note, nudging our larger portfolios further into the green. But, just as Mr. Market giveth, he taketh away. And that’s exactly what’s happening Tuesday morning. As of 11 a.m. ET, all three averages are down significantly. And the tech-heavy NASDAQ is getting the worst of it. The surprise villain is Google, aka Alphabet (trading symbols: GOOGL and GOOG).
A Thompson Reuters dispatch tells us why. That info, quoted below, combines an early report with updated information.
“Google parent Alphabet Inc. missed Wall Street estimates for first-quarter revenue on Monday, posting its slowest growth in three years. The disappointing earnings report comes after its rivals for ad dollars Facebook, Snapchat, Amazon, and Twitter, all posted results that were in line or above analyst expectation last week. So investors dumped shares in afterhours trading, pushing the stock down over 7%. [The ad revenue drop occurred] amid increased scrutiny on the company’s private practices and efforts to restrict advertising on potentially offensive content.”
A Thompson Reuters video offers more on Google here.
Google’s surprising (but perhaps unsurprising) ad revenue miss
Mysteriously, Google / Alphabet still refuses to break out the ad and revenue figures for its wholly-owned YouTube subsidiary.
We wonder if ad numbers here are shrinking at least in part because Google’s hard-left Thought Police have been so busy de-monetizing every right-leaning video channel they can find. Although you rarely see them in the top of any video search list, these sites are widely followed. Eliminating their revenue – likely due to battlefield prep for Election 2020 – is or soon will send them somewhere else.
Similar demotions have been a regularly occurrence on Google’s search engine for years. Why not here?
Contrary to popular opinion, the number of consumers who follow these sites and personalities is not trivial. We’ve said a million times before in these columns that virtue-signaling and blatant political partisanship by big American companies will only hurt them in the end.
Perhaps Google is inadvertently joining the ranks of other companies whose offensive politicking has hurt the value of their shares. Companies like Carbonite (CARB), Kellogg’s (K) and Procter & Gamble’s (PG) Gillette subsidiary. Could be.
UPDATING, April 30 at 2 p.m. ET.
A CNBC update report focusing on YouTube reluctantly provides more confirmation for our observations on YouTube’s notorious censorship of the right, which its algorithms regard as loaded with “conspiracy theories.”
“In the first quarter of 2018, Google began making changes to YouTube’s algorithms designed to stop harmful content from appearing in the feed of recommended videos you see on the side of a video page.
“The goal was to make it harder to find videos full of conspiracy theories, fake news and all that other detritus that occasionally sent advertisers fleeing from the platform. Instead of YouTube directing you to a conspiracy theory about the latest school shooting, you were shown related videos from “authoritative” news sources the company considered worthy of bringing you accurate information.
“On top of that, YouTube has removed millions of channels and videos that violated the company’s harmful content policies, most notably Alex Jones.
“But all of those garbage videos also kept engagement high. It kept YouTube users tuned in to their feeds beyond the video they came to watch, even if the company said they only made up less than 1% of all videos on the site.”
So who says the deleted videos were “garbage videos”? YouTube’s viciously left-wing censors? Notably, channels supporting Stalinist thugs like Antifa face no such censorship.
The Google ripple effect on other Big Tech
From a technical and trading perspective, Google shares are so widely followed and live in so many individual, corporate and hedge fund accounts, not to mention a slew of tech ETFs that the ripple effect in Tuesday trading action thus far has been damaging in that sector. GOOGL is off an additional 9 percent as we write today’s column. It currently stands at $1185 per share.
Besides Google, getting hit Tuesday are other widely-followed tech giants. These include Apple (AAPL), off nearly $5.00 per share, a current loss of 2.5 percent. Ditto, retail and tech monster Amazon.com (AMZN), off nearly 1.5 percent on the day thus far due to a nearly $28 per share haircut. And even China’s retail-tech giant Alibaba (BABA) felt the Google burn. Investors hit the shares today for 1.4 percent loss, with thares trading down $2.56 per share at the moment.
Complicating all matters tech
Interestingly enough, the pummeling seems concentrated in the high-tech high-growth arena of large-cap stocks that compete closely with Google-Alphabet on a number of fronts. That’s why the Invesco equal weight ETF (RYT) was actually up a few cents until just moments ago. Equal weight ETFs, as opposed to ETFs based on cap-weighted indexes, are generally less volatile. We tend to balance the two categories in our portfolios. So our holdings in RYT stabilize, to some extent, the volatility of our jumpier, more popular tech shares.
Fortunately, we don’t currently own Google shares (GOOGL), sensing for some time it looked a bit toppy. But our modest holdings in AAPL, AMZN and BABA are still getting a haircut in sympathy with Google.
More problematic for us: While AMZN reported great earnings for the current quarter, Apple plans to announce its Q2 2019 earnings after the bell today. So who knows where the iPhone giant’s shares will end up in after-hours trading today or after the opening bell on Wednesday? This stock actually tends to go DOWN after a good earnings reports.
Should we throw in the towel on Big Tech?
Interviewed on CNBC this morning, Paul Meeks, a noted technology investor told the network that he was“putting the brakes on his bullish forecast.”
“Meeks sees investors getting burned by tech stocks, saying the rally has gone too far, too fast.
“‘My issue is not fundamentals,’ he said Monday on CNBC’s ‘Trading Nation ‘ segment. ‘It’s more about stretched valuations…’
“The tech-heavy Nasdaq has surged more than 30% since the December low. On Monday, it hit a fresh intraday all-time high of 8,176.08.
“‘If we have any whiff of even a slight disappointment, … some of these stocks could tumble,’ said Meeks.”
Or should we make use of today’s downdraft in tech to invest in more?
On the other hand, Gene Munster, another top tech investor, told CNBC he thinks that Apple, at least, will offer a nice upside surprise for investors. At least those who continue to hold these shares into and beyond today’s Q2 report.
“[Munster] is not predicting a blowout number when Apple reports quarterly numbers on Tuesday afternoon.
“But, he holds one of the most bullish views on Wall Street. Munster predicts Apple stock will rally more than 70% in the next 24 months.
“‘There’s meaningful upside to the Apple story. I suspect that this year, Apple will be the best-performing FAANG stock,’ the Loup Ventures managing partner said Friday on CNBC’s ‘Trading Nation’ segment. ‘I think this can be closer to $350 [a share]. … I know historically it has not gotten the multiple. But I think that will slowly change.’
“When the iPhone maker reports fiscal second quarter numbers, Munster expects earnings per share and revenue to be slightly above Street estimates.”
Whatever. We hold the shares and expect some choppy waters in AAPL today. But we plan to hang in there and see what happens.
The irritating Jeff Bezos continues to make more and more money for Amazon investors
Meanwhile, although we detest left-leaning Amazon CEO Jeff Bezos’ politics, we might add another expensive AMZN share or two if that stock drops a bit more today. Amazon will either hit the skids or get trust-busted. Some day. Meanwhile, however, this company is like a massive, blob-like version of Pac-Man, chomping and devouring anything in its path. Or any new path it choosing to get involved in. Google must be experiencing some Amazon-envy Tuesday morning.
China trade talks should wrap up soon. Seriously? But we’re all gonna die in 10-12 years…
In other news outside Google and tech, at least two higher-ups in the Trump administration claim current US-China trade talks will conclude within two weeks. If so, that will add considerable juice to our currently meandering markets. Problem is, optimistic predictions concerning these negotiations are a bit like hard-left Democrat-Socialist predictions that we’re all going to die in 10 or maybe 12 years. Because, you know,
global warming climate change.
But didn’t Al Gore give us a 10-12 year timeframe during which all the world’s glaciers were going to melt? A prediction he made sometime in the early Aughties? If you believed that globalist BS then, you’re doomed to repeat that error if you listen to the fake prophecies of our current snake oil salespersons on the left.
— Headline image: A Google homepage view. (Screen grab)