Wall Street’s favorite FAANG is mired in its worst monthly stock performance in two years and analysts are counting on earnings to pull it out of the tailspin.
Google owner Alphabet Inc. is down about 13% in April, erasing $237 billion in market value as jittery investors dump growth stocks amid fears of bigger and faster rate hikes thanks to rising inflation.
One constant in the turmoil: analysts’ enthusiasm, with zero sell and hold recommendations among the 54 covering the stock. None of the other megacaps can boast that profile — even Amazon.com Inc., once the highest-rated tech behemoth, has one hold and one sell rating to offset its 57 buys.
They have several reasons for their undiminished optimism. Wall Street forecasts that the internet giant will post faster revenue growth this year than most of the other FAANGs — Facebook, Apple Inc., Amazon, Netflix Inc. and Google — while the stock trades at a discount to them.
Sales are projected to climb 18%, a pace that might help calm the nerves of investors concerned that big tech is losing its growth bona fides. That compares with Apple and Amazon which are projected to report growth of 8.3% and 14.6% respectively, according to data compiled by Bloomberg. For all companies in the S&P 500 Index, brokers predict growth of 10.4%
The first milestone for Alphabet comes after the market closes Tuesday, when it reports first-quarter results. Analysts forecast revenue growth of 24% for the first three months of the year, along with an almost 20% increase in earnings per share.
Alphabet’s Results to Be Fueled by Search, YouTube Ads: Preview
“This has been a challenging market for tech overall, and Alphabet did get swept up in that, but its growth still looks steady in contrast to a lot of other names,” said Peter Choi, senior research analyst at Vontobel Asset Management. “This is a name people should be comfortable stepping into, given the growth prospects and a valuation that not only never got out of hand, but which now looks quite reasonable.”
Alphabet shares trade at less than 19 times estimated earnings, the cheapest level since March 2020. Its peers are pricier, with Apple at a multiple of 26, Microsoft Corp. at 27, and Amazon at 40. The Nasdaq 100 Index sits at about 23.
“The current climate is kind of tough right now,” Synovus Trust senior portfolio manager Daniel Morgan said of Alphabet. “I think they should be OK. As long as they execute on everything.”
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Trading of Twitter Inc.’s shares exploded this month as investors speculated on whether Elon Musk would purchase the company. About 2 billion shares changed hands in April, resulting in turnover of nearly $100 billion, both the most on record. The deal was announced late afternoon Monday with Musk agreeing to buy the social media company for $44 billion.
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