S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
AI Stock Caught Trading Under Secret Name (Ad)
MarketBeat Week in Review – 2/19 - 2/23
Taiwan giant chipmaker TSMC opens first plant in Japan as part of key global expansion
AI Stock Caught Trading Under Secret Name (Ad)
A collection of the insights Warren Buffett offered in his annual letter Saturday
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
Better Than Oil Stocks (Ad)
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
Macron booed by French farmers who blame him for not doing enough to support agriculture
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
AI Stock Caught Trading Under Secret Name (Ad)
MarketBeat Week in Review – 2/19 - 2/23
Taiwan giant chipmaker TSMC opens first plant in Japan as part of key global expansion
AI Stock Caught Trading Under Secret Name (Ad)
A collection of the insights Warren Buffett offered in his annual letter Saturday
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
Better Than Oil Stocks (Ad)
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
Macron booed by French farmers who blame him for not doing enough to support agriculture
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
AI Stock Caught Trading Under Secret Name (Ad)
MarketBeat Week in Review – 2/19 - 2/23
Taiwan giant chipmaker TSMC opens first plant in Japan as part of key global expansion
AI Stock Caught Trading Under Secret Name (Ad)
A collection of the insights Warren Buffett offered in his annual letter Saturday
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
Better Than Oil Stocks (Ad)
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
Macron booed by French farmers who blame him for not doing enough to support agriculture
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
AI Stock Caught Trading Under Secret Name (Ad)
MarketBeat Week in Review – 2/19 - 2/23
Taiwan giant chipmaker TSMC opens first plant in Japan as part of key global expansion
AI Stock Caught Trading Under Secret Name (Ad)
A collection of the insights Warren Buffett offered in his annual letter Saturday
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
Better Than Oil Stocks (Ad)
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
Macron booed by French farmers who blame him for not doing enough to support agriculture

Alphabet triggers a sell-the-news reaction: Time to buy the dip?

Key Points

  • Alphabet shares sold off as Google reported just an 11% year-over-year (YoY) growth in its advertising sales in Q4 2023.
  • Google launched its Gemini era in December 2023, its next-generation large language model (LLM) that operates in 40 languages.
  • Google’s subscription business grew to $15 billion in 2023, driven by YouTube Premium, YouTube Music and YouTube TV memberships.
  • 5 stocks we like better than Alphabet

Alphabet Inc. NASDAQ: GOOGL is a holding company that owns and operates a portfolio of enterprises, with Google being the main subsidiary. The computer and technology sector giant relies on advertising and search revenues to fund all its other projects. Google is the leading search engine, with an 83% market share of the global search market.

As dominating as this sounds, it has dropped from a peak of nearly 90% in the past three years as rival search engine Microsoft Co. NASDAQ: MSFT Bing grew its market share to 9.19%, up from 6.43%. 

The two behemoths have been embroiled in a generative artificial intelligence (AI) arms race pitting Open.ai's Chat-GPT against Google's Bard AI powered by its next-generation large language model (LLM) Gemini for mainstream dominance.

Check out the sector heatmap on MarketBeat.

Glass half empty 

Despite releasing strong numbers, the market punished Alphabet shares as they sold off by 11% following its earnings report. On January 30, Alphabet reported Q4 2023 EPS of $1.64, beating consensus analyst estimates by five cents. 

Revenues grew 13.5% year-over-year (YoY) to $86.31 billion, beating analyst estimates of $85.28 billion. Google Search and Other revenues grew 12.7% YoY to $48 billion. Google Advertising revenues rose 11% YoY to $65.5 billion.

YouTube Ads revenues rose 16.5% YoY to $9.2 billion. Google Cloud revenues rose 26% YoY to $9.2 billion with an operating income of $864 million. Google's subscription business has grown revenues to $15 billion annually, driven by YouTube Premium, YouTube Music, and YouTube TV.


Alphabet CEO Sundar Pichai commented, "Our robust growth has been driven by strong direct and indirect channels. With ISVs, we have nearly tripled the number of co-sell deals from 2022 to 2023. In our ecosystem, there are nearly 90,000 Google Cloud Gen AI-enabled consultants. And Accenture has teamed up with Google Cloud to create a joint generative AI center of excellence."

Get AI-powered insights on MarketBeat.

A finicky sell-the-news market reaction

The market can be finicky with Alphabet's results. In its Q3 2023 earnings release, the market sold off shares of Alphabet because its Google Cloud revenues indicated a deceleration in growth, reporting 22% YoY growth versus the 28% YoY growth in its previous Q2 2023 quarter. Still, advertising revenues grew 9.4% to $59.6 billion, while YouTube Ad revenues rose 11.3% to $7.9 billion. For 2023, Alphabet grew revenues 13% YoY to $86 billion. Advertising saw solid growth in the retail vertical, notably in the APAC region.

Advertising revenue normalization 

Upon reporting strong results for its fourth quarter of 2023, the market sold off Alphabet shares by 10% due to the perceived slowdown or normalization in advertising revenues, growing only 11% YoY to $65.5 billion, short of expectations for $65.8 billion. 

YouTube Ads revenues climbed 16.5% YoY to $9.2 billion, while Google Cloud revenues accelerated again, growing revenues 25.7% YoY to $9.2 billion, achieving its first operating profits for 2023 with a 5.2% operating margin. In comparison, Google is still far behind Amazon.com Inc. NASDAQ: AMZN AWS cloud margin of 30%, but margin expansion should be positive.

Launching the Gemini AI era

Google stated that the Gemini era has launched. Gemini is Google's next-generation LLM released in December 2023. 

It comes in three versions: Nano, Pro and Ultra, enabling it to operate on various devices ranging from smartphones to data centers. Gemini Pro works with over 40 languages, generating text and communicating in over 230 countries. Gemini is being utilized in search, resulting in a 40% latency reduction in the United States.

The initial rollout applies Gemini Pro to power text-based prompts but will gradually expand to support multimodal content, including audio and images. Bard should be upgraded to Bard Advanced powered by Gemini Ultra, enabling it to operate in different modalities. Unlike Chat-GPT, Bard is still under development in beta mode and isn't explicitly monetized but is used to build Alphabet's AI infrastructure.

Alphabet analyst ratings and price targets are at MarketBeat. You can find Alphabet peers and competitor stocks with the MarketBeat stock screener.

Alphabet chart on MarketBeat

Daily rising wedge breakdown 

The daily candlestick chart on GOOGL illustrates a rising wedge breakdown pattern, a reversal pattern comprised of sharp higher highs and higher lows with a tightening channel that results in a sharp reversal. In GOOGL's case, the daily markets structure high (MSH) sell trigger formed at $151.19 heading into its Q4 2023 earning release, which caused a gap down to $144 as shares eventually slipped to a low of $136.50 before rebounding back up through the daily 50-period moving average support at $139.38. 

The daily relative strength index (RSI) should return to the 50-band. Pullback support levels are at $139.42, $136.50, $131.99 and $128.31.

→ Elon Musk's "Project Dojo" is a Game-Changer (From Stansberry Research) (Ad)

Should you invest $1,000 in Alphabet right now?

Before you consider Alphabet, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Alphabet wasn't on the list.

While Alphabet currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

A Guide To High-Short-Interest Stocks Cover

MarketBeat's analysts have just released their top five short plays for March 2024. Learn which stocks have the most short interest and how to trade them. Click the link below to see which companies made the list.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Alphabet (GOOGL)
2.5914 of 5 stars
$143.96-0.1%N/A24.82Moderate Buy$153.65
Alphabet (GOOG)
3.615 of 5 stars
$145.290.0%N/A25.05Buy$146.33
Microsoft (MSFT)
4.8584 of 5 stars
$410.34-0.3%0.73%37.10Moderate Buy$411.06
Amazon.com (AMZN)
4.9396 of 5 stars
$174.99+0.2%0.11%60.34Buy$197.95
Compare These Stocks  Add These Stocks to My Watchlist 

Jea Yu

About Jea Yu

  • JeaYu21@gmail.com

Contributing Author

Trading Strategies

Experience

Jea Yu has been a contributing writer for MarketBeat since 2018.

Areas of Expertise

Equities, options, ETFs and futures; fundamental, qualitative, quantitative and technical analysis and pattern identification; active and swing trading; trading systems and methodology development

Education

Bachelor of Arts, University of Maryland, College Park

Past Experience

U.S. equity markets trader, writer and analyst for over 25 years. Published four books by publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. Speaker at various expos and seminars and has been quoted and featured in USA Today, The Wall Street Journal, Traders Magazine, The Financial Times and various trade publications, including Stocks & Commodities, Active Trader and Online Investor.


Featured Articles and Offers

Microsoft Stock to $450? Here's How

Microsoft Stock to $450? Here's How

Microsoft's stock price is pulling back following the Q4 results, suggesting a top is in play, but investors should not be so quick to shed their shares.

Search Headlines: