Alphabet Inc. (NASDAQ: GOOG) recently released its fourth-quarter earnings, surpassing both revenue and earnings estimates. Despite this positive news, the stock experienced a decline of over 5% in pre-market trading, as investors considered the slower-than-expected growth in the advertising business. The quarter’s total revenue reached an impressive $86.3 billion, marking a 13% increase from the same period last year and surpassing the forecast of $85.3 billion. Likewise, earnings per share (EPS) rose to $1.64, up from the previous $1.05, and exceeded the expected $1.60.
One notable highlight was the significant 26% increase in cloud revenue, credited to the influence of generative AI, as mentioned by CEO Sundar Pichai. However, all eyes were on the advertising figures, with total sales in this sector rising by 11% to $65.5 billion, albeit falling short of the forecasted $65.8 billion. The disappointment in these numbers could be indicative of market uncertainty surrounding the timing of potential interest rate cuts by the Federal Reserve. Corporations may be exercising caution in their spending decisions until more clarity emerges on the monetary environment.
The upcoming session holds particular importance for Alphabet, as the Federal Reserve is set to disclose its latest interest rate decision. This event could provide valuable insights into the timeline of the monetary easing path, potentially impacting Alphabet’s future market performance.
Technical
A steep uptrend has formed on the daily chart, as the price appreciated by close to 52% over the last year. However, the pre-market decline could trigger a pullback, confirmed by the overbought conditions, as indicated by the RSI.
The gap down could see the price look for support at $146.58, at the dynamic support of the uptrend. The movement around this level could be crucial, as an additional leg down could signal a potential trend reversal. The Fibonacci midpoint at $138.48 could then come into play, with the 61.8% Fibonacci golden ratio not far below at $134.56. These levels could be of importance if the breakdown occurs, as a retracement may be initiated if support is found.
Conversely, if the price fails to break down the trend, it could pivot off $146.58 to confirm a continuation of the current trend. Resistance at $152.08 could then present a hurdle to the upside before a retest of the 161.8% Fibonacci extension from the prior bottom could occur at $154.83.
Summary
Alphabet has recently released its fourth-quarter earnings report, and despite delivering a double beat, its share contracted by over 5% in after-hours activity. As we advance, the Federal Reserve’s interest rate decision could be pivotal in the future direction of the trend.
Sources: Koyfin, Tradingview, Alphabet, Inc.
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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