Daily Management Review

Alphabet shares fall by 7% after Q1 reporting


Alphabet revenue rose by 17% in the first quarter of 2019, which is generally a very solid figure, considering that it was $ 36.3 billion. But analysts and investors expected more from the American corporation, and the lack of clear explanations for the causes of problems makes investors doubt bright future of the company.

Robert Scoble
Robert Scoble
Alphabet Inc presented its financial report for the first quarter of 2019. It follows from the statement that the corporation's revenues for the three reporting months reached $ 36.3 billion, which is 17% more than last year. But after the close of the trading session on the NASDAQ, the company's shares on over-the-counter trades sank more than 7%.

Investors were somewhat disappointed with the revenue indicator - analysts expected it to be about $ 1 billion more. Moreover, the 17% increase is the worst indicator of the income growth over the past three years.

In addition, the company receives 84% of its revenues from the advertising business, and they have grown by only 15% over the past quarter. Typically, this figure fluctuates around 20%, and its decline could mean that Google has started to experience problems in this market, not coping with its richness and increasing competition.

The corporation's net profit fell from $ 9.4 billion to $ 6.6 billion, which indicates some problems, even excluding the $ 1.7 billion of the European Commission’s fine for violating antitrust laws.

Alphabet explains the deterioration of quarterly results by several factors, including a strong dollar and very good performance in the first quarter of 2018.

At the same time, analysts complain that it is impossible to understand how serious Alphabet problems are, from reporting, hence investors have a lot of speculation forcing them to sell off their assets. “It’s not possible to know for sure, there are a lot of components here,” SunTrust Robinson Humphrey analyst Youssef Squali told Financial Times. “They (Alphabet) are extremely, extremely scant of speech to explain exactly what challenges the company faces and how great their influence is. All this can serve as a signal for a strain."

source: ft.com