Internet giant Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG) is scheduled to report its Q4 earnings on Thursday, February 2. The downward pressure on advertising revenue and tough year-over-year comparisons will likely hurt Alphabet’s revenues and profitability in Q4.
Earlier, GOOGL said that solid revenues in the prior year’s fourth quarter would create tough year-over-year comparisons that would weigh on its ad growth rate. Meanwhile, lower enterprise spending on ads amid economic uncertainty remains a drag.
Monness analyst Brian White expects Alphabet’s top-line growth to decelerate further in Q4. This shouldn’t surprise much as the company’s revenue growth rate moderated sequentially in 2022 (from 23% in Q1 to 6% in Q3).
White expects Google Advertising revenue to decline by 3% in Q4. Meanwhile, he expects YouTube ads to decrease by 5%. However, the analyst expects cloud revenues to grow by 37%.
Overall, the analyst expects Google to meet its revenue forecast of $75.81 billion. The consensus estimate stands at $76.60 billion. Meanwhile, analysts expect GOOGL to post earnings of $1.18 a share in Q4, reflecting a decline of over 20% compared to the prior-year quarter.
Despite the near-term headwinds, White is bullish about GOOGL and expects the company to benefit from the ongoing digital shift and favorable digital ad trends in the long term.
Is GOOGL a Buy, Sell or Hold?
GOOGL, like most of its tech peers, is struggling to accelerate growth amid macro weakness. The company also announced massive job cuts to reduce operating expenses.
Despite the headwinds, 23 analysts have unanimously rated GOOGL stock a Buy, which translates into a Strong Buy consensus rating. Further, these analysts’ average price target of $126.04 implies 30.02% upside potential.
