Stock Entry Point Article​

Despite historic ad revenue fall, Alphabet is still a top online advertising stock

The pandemic has caused many firsts. One of them was Alphabet’s ad revenue fall for the first time in the company’s history. The economic downturn caused by the coronavirus outbreak compelled advertisers to pull back on ad spending.

Q22020 revenues beat analyst estimates thanks to YouTube, Google Cloud

Alphabet’s Q22020 earnings results were announced on July 30th, 2020. Revenues came in at $38.29 billion, down 2% as compared to revenues of $38.94 billion in Q22019. However, the revenue drop was better than analyst estimates. YouTube ad revenues were up 6% year-on-year. Google Cloud revenue was also up from $2.1 billion to $3 billion.

Alphabet is still a contender for the best advertising stock

Alphabet has a dominant market share of over 80% in the online search market. The company’s operating system Android powers 85% of global smartphones. Therefore, the platform and scale offered by Alphabet for advertising are unparalleled.

According to CEO Sundar Pichai, “In our advertising business, our focus is on helping businesses find customers as they work to rebuild and recover. We gave search advertisers the ability to add high quality images to their ads helping shoppers quickly see products to consider and take action faster. We added features to make video ads more easily shoppable and browsable on YouTube as more businesses are shifting to online to offset physical store closures.”

Financial performance of the stock

Alphabet’s stock is up 4.67% for the year 2020. It has rebounded by 35% since the March market crash. That performance compares well with the S&P500’s 0.71% gain year-to-date. Other digital advertising stocks like Facebook and Twitter have performed better than Alphabet as things stand as of September 22nd, 2020. Facebook is up 18% year-to-date and up 66% since the March market crash. Twitter, meanwhile, is up 23.5% year-to-date and up 81% since the March market fall. While the recent stock performance of Alphabet doesn’t look the best, it is still among the top advertising stocks 2020.


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