Business

Google Stock Had Its Best Day of the Year, After Earnings Weren't as Bad as Feared

Arnd Wiegmann | Reuters
  • Shares of Alphabet closed up more than 7.6% Wednesday, a day after the company delivered better-than-feared earnings for the second quarter.
  • Though Alphabet's earnings missed analysts' expectations, some analysts said the results were better than feared given the unwelcoming macro advertising environment.
  • Still, Alphabet stock is down 22% year to date.

Shares of Alphabet closed up more than 7% Wednesday, a day after the Google parent company reported earnings for the second quarter that weren't as bad as feared.

The company posted earnings of $1.21 per share on $69.69 billion of revenue, both slightly below consensus estimates, as growth slowed dramatically from last year. Revenue growth dipped to 13% from 62% a year earlier, and advertising revenue only increased 12%. YouTube advertising revenue rose only 5% after soaring 84% during the year-earlier period.

But the results came days after Snap delivered a disappointing quarterly report that led to a nearly 40% plunge in its stock price. In that report, Snap warned that early third-quarter advertising sales were flat year over year, and were tracking far behind the full quarterly growth of 18% that analysts were expecting. After the bad news, investors also sold off shares of Alphabet, along with other companies that rely a lot on online advertising.

But with so much bad news priced in, shares rallied when Alphabet's results and guidance were simply not horrible.

"With advertising revenue approximately in line with consensus and as shares were down 11% since reporting 1Q earnings, we view the report positively despite us reducing forward estimates," wrote JMP's analysts in a note, saying they will maintain Alphabet's outperform rating and the price target of $160.

"Our primary takeaway is that search's demand is persistent even in a tough macro advertising environment given its consistent and high ROI while benefiting from its diversification across online and offline as well as across verticals and geographies," JMP analysts' noted.

Still, Alphabet stock is down 22% year to date.

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