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Alphabet Makes Strong Rebound, Shares Rise Over Easing Of Investor Concerns


07/26/2019


Alphabet Makes Strong Rebound, Shares Rise Over Easing Of Investor Concerns
The quarterly performance of Google parent Alphabet apparently eased concerns among investors about the increasing challenges for Google’s advertising business which saw the shares of the United States based tech giant rise by 8 per cent.
 
The second-quarter revenue and earnings of the company surpassed analysts’ expectations driven by growth in ad sales. Additionally, the largest online search and ads company of the world did not making any worrying forecast about increasing regulatory scrutiny as had been done by Facebook just a day earlier.
 
In the first quarter, Alphabet had reported a very rare $1 billion revenue miss which had caused investors to question the business prospects and  resulted in the worst every one day sell off in its stocks in over seven years. The second quarter performance has apparently put an end to the questions raised after the first quarter results.
 
So far this year, Alphabet has not been able to match up with the growth in its share prices on Wall Street compared to the growth clocked by its tech peers and has managed to rise by only 9 per cent when trading closed on Thursday. In contrast, there has roughly been a 20 per cent rise in the the S&P 500 broadly.
 
Analysts however still are worried about how the company performance and ad prices would be impacted by privacy, content moderation and antitrust rules that have either been proposed or already implemented not only in the United States but also in some of the other high-revenue countries that Google operates in. there is also a slowdown in ad sale in United States and Europe across the tech industry which is a challenge for Google. The drop in the US and Europe in ad sales is yet to be offset by growth in revenue from emerging markets.
 
Growth in the company would be spurred by new services for consumers worldwide and advances in ad targeting, Google Chief Executive Sundar Pichai told analysts on Thursday. Calls for regulation had been survived by the company before, he said. “We understand there will be scrutiny,” and “we will engage constructively,” he said.
 
Total revenues of $38.9 billion was reported by Alphabets for the second quarter, about 85 per cent of its revenues are accounted for by sales of ad space and ad technology. The revenues marked a 19 per cent year on year growth while the first quarter had marked a 17 per cent year on year growth in revenues. According to IBES data from Refinitiv, a growth of 16.8 per cent in revenues and $38.2 billion in revenue was expected by analysts on the average.
 
It was two years ago that Alphabet had last reported two consecutive quarters of lower than 20 per cent revenue growth.
 
The company had earlier said that the recent performance of Alphabet was being affected not because of advertiser flight or some deeper challenge to its business but by issues such as currency exchange rates and one-off fluctuations.
 
The company has witnessed “virtually no impact” on its revenue of the efforts to prevent ads on those YouTube videos that have been characterized to be extremist or hateful, said Alphabet’s chief financial officer, Ruth Porat, dispelling other analyst concerns.
 
(Source:www.economictimes.com)