The past few weeks have been complicated for technology companies – Apple, Amazon, Meta and even Netflix – and their stocks. Investors have indeed shunned them because of the quarterly results for the majority below expectations, and the threat of rising interest rates to their business. One name still stands out from the pack.
The next few weeks do not necessarily look bright for Big Tech. After mixed results for some, the outlook for the current quarter and the one to come is indeed rather lackluster. The Nasdaq technology index was hit hard with a loss of 5.1%. In question, the disruptions in the supply chain linked to confinements in China, the loss of a market – that of Russia –, global inflation and finally, the shortage of raw materials. A context that obviously frightens investors, some have already distanced themselves, although not all technology companies are affected in the same way. Some could even get away with it. For many, Google is a special case, a green oasis in the heart of a desert.
“Google has weathered a few recessions before, and has held up pretty well,” Raymond James analyst Aaron Kessler told Reuters. CNN Business. “Usually the last thing advertisers cut is their Google spend. »
The American company, however, recorded a drop of $ 16.4 billion in profits during the first quarter. So she suffers like the others, why is she safer then?
Alphabet, the exception
Unlike others, Alphabet – Google’s parent company – can rely on its various subsidiaries to stay afloat. The American company offers various services, including Google Search, Google Cloud and YouTube. During the first quarter, the former recorded solid growth of 24%, while the latter’s revenue increased by 44%.
On the side of the video platform, the results were not so positive. YouTube’s advertising revenue has indeed fallen short of expectations. Due to the war in Ukraine, many European advertisers withdrew their marbles at the start of the invasion, says CNN Business. But not enough to shake the YouTube juggernaut and its 2 billion active users per month.
Bank of America analysts have indeed pointed out that Alphabet has a more stable business than its peers, making it a safer stock even in times of disenchantment for tech stocks.
In addition to its “consumer” services, the company is also active in the artificial intelligence and machine learning sector and is positioned at the top of the ranking. It also has great spending flexibility and a management team that pampers shareholders.
More protection against fluctuations
If Google is already doing quite well, Alphabet’s plan to divide its shares by 20 should only strengthen its position. By proceeding in this way, the Mountain View firm will allow small investors to take a stake in the company.
Splitting a stock increases the liquidity of the company, which generally means more protection against extreme fluctuations. In addition, it boosts the enthusiasm of investors towards it. The splitting of a share is in fact interpreted by the market as a signal of good health for a company and that its managers expect continued growth. Strong demand for company stock often follows a split. Moreover, Google is not the only one to plan a split of its shares.
“We expect slower growth this year than last year,” Kessler conceded, because while Google is doing better than other tech companies, the US firm is not escaping global disruption. . However, “we think Google probably has the strongest fundamentals in large-cap internet names,” he added.