Can Alphabet Pull Ahead With Q3 Earnings After the Close?

Alphabet Inc. (NASDAQ: GOOGL | GOOGL Price Prediction) is scheduled to release its most recent quarterly results after the markets close on Monday. The consensus estimates are calling for $12.42 in earnings per share (EPS) and $40.32 billion in revenue. The third quarter of last year reportedly had $13.06 in EPS and $33.74 billion in revenue.

While Amazon trails Google by a factor of nearly six in search advertising, Amazon’s share is expected to rise by three percentage points over the next two years, from 12.9% to 15.9%. That growth is forecast to come primarily at the expense of Google, which is expected to see a decline from 73.1% of the 2019 search market to 70.5% by 2021.

A recent report from digital marketing research firm eMarketer estimates the search advertising market to reach some $55.17 billion this year, of which Google is expected to grab about $40.33 billion to Amazon’s $7.09 billion. Of the top five companies ranked by search revenues, only Amazon is projected to increase its share of the market over the next several years.

When a customer searches for a product on Amazon, vendors can boost their place in the search results by “sponsoring” keyword-targeted results promoting their products. The beauty of Amazon’s ad business is that about half of customers don’t even know that the top search results are paid advertisements.

Amazon also sells display and video ads. In May, the e-commerce giant acquired ad service Sizmek, which is expected to make the company’s search advertising even more attractive to vendors. Sizmek has two parts: an ad server that makes it easier for advertisers to place ads and to track their effectiveness and a “dynamic creative optimization” piece that will allow advertisers to tailor ads for specific attributes, like location.

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If that all sounds Google-like, that’s no accident. That is essentially what the search engine behemoth does and, by mimicking Google’s formula, Amazon is following a proven path to success. The Amazon advantage is that customers are there either to comparison shop or to buy something. That’s not always the case with Google.

Excluding Monday’s move, Alphabet had performed more or less in line with the broad markets, with its stock up 21% year to date. In the past 52 weeks, the stock was up closer to 20%.

A few analysts weighed in on Alphabet ahead of the results:

• BMO Capital Markets rates it as Market Perform with a $1,245 target.
• Merrill Lynch has a Buy rating with a $1,450 price target.
• Credit Suisse has an Outperform rating and a $1,700 target price.
• Monness Crespi & Hardt has a Buy rating with a $1,360 target price.
• Stifel’s Hold rating comes with a $1,299 price target.

Shares of Alphabet traded up about 2% at $1,288.59 on Monday, in a 52-week range of $977.66 to $1,296.97. The consensus price target is $1,426.90.

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