28 April 2021

Alphabet Smashes Q1 Estimates, Shares Spike

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News shaping
the markets today

     

What’s happening: Shares of Alphabet gained in extended trading on Tuesday after the search and advertising giant reported upbeat results for its first quarter.

What happened: Alphabet posted record profits for the second straight quarter and announced a $50 billion share repurchase plan.

The Mountain View, California-based company warned, however, that growth in usage and advertising sales could slow as people resume in-person activities (like visiting restaurants and travel).

How were the results: Google’s parent Alphabet reported growth in sales and earnings for the first quarter, with both its top- and bottom-line exceeding market estimates.

  • Sales grew by a whopping 34% to $55.3 billion, smashing market expectations of 26% growth.
  • Profits came in at $17.9 billion, or $26.29 a share, exceeding the consensus estimate of $15.88 per share and surpassing its earlier record high of $15.2 billion in the prior quarter.

Why it matters: Google’s advertising sales spiked 32% year-over-year in the first quarter, above market expectations. Investors were particularly happy with this performance, as the ad business accounts for around 80% of Alphabet's revenues. Management indicates that the retail, technology and consumer product sectors were among the biggest advertisers in the quarter.

Alphabet’s cloud sales also jumped in the first quarter, recording 45.7% growth, and narrowed its operating loss to $974 million.

The US, which contributes the lion’s share of Alphabet’s revenues, had fully vaccinated about 17% of the population by the end of the first quarter. Several activities, such as in-house dining and travel, restarted in big cities. There was some concern around whether the resumption of these activities would impact the company’s results going ahead.

So far, Alphabet’s results indicate that its services, including search and YouTube, may continue benefiting from the pandemic-driven trends even after the restrictions ease. The increased reliance of people on online services for information, communication, and entertainment may continue even as countries emerge from lockdowns.

The company’s board also authorised $50 billion in share buybacks for its Class C capital stock. Alphabet did not repurchase shares in 2020.

How shares responded: Alphabet’s shares rallied 4.3% to $2,389.80 in after-hours trading on Tuesday following the release of strong quarterly results. The stock rose around 80% in 2020, supported by changing consumer behaviour during the pandemic.

What to watch: Investors may keep an eye on regulatory scrutiny of tech companies by authorities in America and Europe. Markets expect the heat to increase again, after having died down last year due to the pandemic.

The Markets Today

     

Crude oil will be in focus today ahead of the EIA’s (Energy Information Administration) report on crude oil inventories.

Context: Oil futures settled higher on Tuesday after the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) surprised traders by meeting a day earlier than planned.

Details: The OPEC+ had earlier agreed to gradually raise oil output by 350,000 bpd (barrels per day) in May, 350,000 bpd in June, and 441,000 bpd in July. Saudi Arabia, which was voluntary cutting production, had also said it plans to ease these cuts during the May to July period.

Although the OPEC+ meeting was scheduled for Wednesday, the group met yesterday and announced plans to maintain its current output plan.

The next JMMC (Joint Ministerial Monitoring Committee) and OPEC+ meetings are scheduled for June 1.

The continuous increase in covid-19 cases in India, the world’s third largest oil importer, has raised concerns over the outlook for energy demand. India reported over 320,000 fresh cases with around 2,770 deaths on Tuesday. The country has recorded more than 300,000 cases for six consecutive day.

Market sentiment was also hurt by the American Petroleum Institute (API) reporting a rise in crude stockpiles in the US by 4.319 million barrels in the week ending April 23, following a 0.436 million increase in the prior week.

Despite these concerns, oil prices were supported by the OPEC’s decision. WTI (West Texas Intermediate) crude for June delivery gained $1.03 to settle at $62.94 per barrel on the NYMEX (New York Mercantile Exchange) on Tuesday. June Brent crude added 77 cents to close at $66.42 per barrel on the ICE Futures Europe.

In other energy commodities, May gasoline gained 4 cents to settle at $2.02 a gallon on Tuesday, while May natural gas added 8 cents to close at $2.87 per 1,000 cubic feet.

What to watch: Markets await weekly oil supplies data from the EIA. Analysts expect US crude inventories to decline by 200,000 barrels in the week ending April 23. Gasoline stockpiles are expected to remain unchanged for the week, while distillate supplies are projected to fall by 1.2 million barrels.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 149 million.

Other Markets: US indices closed mostly lower on Tuesday, with the S&P 500 and Nasdaq 100 down by 0.02% and 0.47%, respectively. The Dow Jones index managed to remain in the black, edging higher by 0.01%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s GfK consumer climate indicator, France’s consumer confidence index, Brazil’s FGV consumer confidence index and net payrolls, Canada’s retail sales, Saudi Arabia’s value of loans and money supply M3 as well as America’s MBA Mortgage applications, wholesale inventories, goods trade balance and the Federal Reserve’s interest rate decision.

 

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