Alphabet share price forecast: Google impresses with remarkable recovery

The Alphabet share price forecast is looking upwards after Google’s owner capped off 2020 with an impressive bounceback in advertising revenues

Analysts making Alphabet share price forecasts were searching for one thing when the tech giant released its latest quarterly results: a recovery in advertising.

True to form, Google stock predictions have been given a much-needed shot in the arm after its parent company managed to surpass Wall Street expectations on a series of key metrics.

Year on year, overall revenues jumped up by 23 per cent in the final three months of 2020 – the surest sign yet that Alphabet’s core business is starting to recover following the dramatic decline seen in spending over the second quarter of the year.

Also fuelling optimistic Alphabet stock predictions is an impressive performance over at YouTube, where the video-sharing site is continuing to cement its reputation among younger consumers. Covid-19 has helped contribute to a greater number of viewers – and generally speaking, they’re also spending a lot more time on the platform than they used to. The fact that YouTube can now be accessed through many smart TVs will have helped.

Google’s chief business officer Philipp Schindler shared this especially staggering statistic:

“We now reach more 18-49 year olds than all linear TV networks combined.”

For those who aren’t familiar with the significance of this demographic, it’s worth noting that this age group is coveted by advertisers because of their spending power. This is the metric that television channels rely on when measuring their ratings as a result. Because of this, it’s little wonder that YouTube ad revenues surged 46 per cent year on year to $6.89bn in Q4.

The Alphabet stock forecast is also being informed by how YouTube’s ad offering is evolving. One of the most successful formats now offered by the video platform is so-called direct response ads, which have the sole objective of encouraging consumers to do something straight away, such as make a purchase or download an app.

Summarising the company’s performance overall, Google and Alphabet’s CEO Sundar Pichai said:

“Our strong results this quarter reflect the helpfulness of our products and services to people and businesses, as well as the accelerating transition to online services and the cloud. We see significant opportunities to forge meaningful partnerships as businesses increasingly look to a digital future.”

Alphabet share price forecast 2021: a strong year ahead?

The Q4 results suggest that the impact caused by the coronavirus pandemic was merely a temporary blip – and as the crisis is brought under control during 2021, there’s a strong chance that the Alphabet share price forecast will only go from strength to strength. Across most crucial metrics, the double-digit growth seen at this tech giant year on year has far outpaced the growth seen over the same period in 2019.

There were a couple of disappointing developments across the group though, potentially affecting Alphabet stock predictions going forward. Across the whole of 2020, Google Cloud ended up losing $5.6bn – with $1.2bn of this seen in the fourth quarter. That’s at odds with the $750 million in profit that Wells Fargo was expecting.

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The company’s chief financial officer didn’t seem too worried by this development – stressing that the top priority is securing as big a market share as possible. One comforting statistic from this division lies in how revenue leapt up by 47 per cent – hitting $3.8bn between October and December.

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All of this helps paint a narrative of a company that’s trying to catch up with the likes of Microsoft and Amazon Web Services in the rapidly expanding world of cloud computing – and given Alphabet’s financial heft, it has a strong chance of succeeding.

Another setback to the Alphabet stock forecast came when Google announced that it was going to be abandoning Loon – an ambitious project that was designed to provide internet access worldwide through a network of balloons floating on the edge of space. The closure is a blow to the so-called “other bets” division that focuses on futuristic (and often ambitious) ideas – with executives admitting “the road to commercial viability has proven much longer and riskier than hoped”. Across the whole of 2020, Alphabet’s “moonshots” lost an eye-watering $4.48bn – and brought in a rather modest $657m in revenue.

What’s next for Alphabet’s share price?

Alphabet’s stock price has been circling at record highs ever since results for Q4 and the full fiscal year emerged – with a current high point of $2,115. To put that into context, that’s up 40 per cent on the price of $1,508 seen 12 months ago.

Let’s wrap things up by taking a look at Alphabet’s share price predictions for 2021 and beyond. The median view indicates that we’ll see a 13.6 per cent jump from current levels to 13.6 per cent, while the high-end estimate projects that GOOG will hit $3,000 this year. On the lower end of things, there are fears of a 28.9 per cent fall in Alphabet’s stock price to $1,477.

Overall, 36 analysts rate Alphabet’s stock as a buy, while four say it will outperform and two have a hold rating in place. There are no sell or underperform ratings at present.

Given how 99 per cent of Alphabet’s revenue is derived from Google’s internet business, a rebound in advertising was regarded as crucial for restoring investor confidence. Last year saw the company report its first-ever decline in quarterly earnings – a grim announcement that sent shivers through Wall Street.

Of course, one fear that never goes away is the prospect of countries around the world seeking to rein in Google’s influence over the internet – not least because of concerns that news outlets are buckling under the strain of the company’s iron grip on advertising.

Right now, Australia is taking Google to task as it pushes forward a draft law that would force the company to pay for news coverage – a move that politicians say is an attempt to protect a dying journalism industry. The tech giant has reacted defiantly to the proposals, and it’s even threatened that the search engine will be shut down in the country if it goes ahead.

The mastermind of the draft law, Rod Sims, was quoted by The Financial Times as saying:

“What happens if they leave? My counterpoint is, what happens if you give them a veto over government legislation? You can’t do that.”

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