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Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock is on sale today. On Jan. 26, GOOGL stock fell to $2,594.80 per share. This is even lower than the $2,893.59 price it closed at last year. This means it has fallen almost $300 so far year-to-date, and gives it a loss of 10.3% in 2022.
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That might be expected from profit-taking after last year’s stellar gains. For example, GOOGL stock was up 65.17% last year, as I showed in my last article on Alphabet on Jan. 5.
That was a very good return and could have prompted many investors to take some money off of the table. This might have been one reason for the downturn so far this year.
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Where Things Stand With Alphabet
I suspect the main reason for GOOGL stock’s decline is likely market forces. When the Federal Reserve begins raising rates, that could slow down economic activity. That could have a follow-on dampening effect on advertising spending in the U.S and even abroad.
Alphabet will announce its fourth-quarter and full-year 2021 results on Tuesday, Feb. 1. Analysts will be able to see if management discusses its outlook for 2022 and if they forecast any downturn in ad spending.
Analysts surveyed by Refinitiv and reported by Yahoo! Finance foresee revenue up 39.3% in 2021 to $254.29 billion. But for 2022, they forecast gains of just 17% to $297.63 billion. In other words, they already are expecting a significant slowdown in revenue growth.
This could account for some of the weakness seen in GOOGL stock recently. However, Barron’s pointed out earlier this month that although two analysts foresee weak first-half results for Alphabet, the second half in 2022 could be strong. By “weak” they mean slower growth, due to comparisons with the strong growth last year that occurred during the rebound from Covid-19 lows.
Moreover, one of the analysts, Justin Post of BofA Global Research, listed five growth themes for the company that could help propel its ad-driven sales going forward. These include short video formats, augmented and virtual reality, creator economy growth (i.e., Youtube), ads in e-commerce and changes made by Apple (NASDAQ:AAPL) to ad formats and data privacy.
Where Analysts Stand on Alphabet
Analysts are universally positive on GOOGL stock. For example, Yahoo! Finance reported that nine analysts had an average target price of $3,382 per share as of Jan. 26. This is 30.8% over yesterday’s price of $2,584.80.
In addition, TipRanks reports that 27 analysts, who have written on the stock in the last three months had an average price target of $3,386.67 as of Jan. 26.