Alphabet Stock Q3 Earnings Preview: GOOGL price sandwiched between supply, demand zones

• GOOGL stock is down 31% year to date.
• Alphabet reports Q3 earnings on Tuesday.
• Wall Street expects $1.25 per share for the tech giant.

Alphabet (GOOGL) starts the week with all eyes on its third-quarter earnings release coming during market hours on Tuesday, October 25. Despite recent uncertainty due to Snap (SNAP) earnings reflecting poorly on digital advertising, Wall Street is calling for GAAP EPS of $1.25 on sales of $70.67 billion. That revenue figure is well ahead of the year-ago figure of $65.12 billion, but most observers will hone in on the EPS figure. This is because Alphabet has missed Wall Street consensus on EPS for each of the past two quarters.

Alphabet stock earnings news

Generally speaking, Alphabet's Google search business should sidestep any downturn in digital advertising, but its targeted banner ad business could suffer a setback. Snap stock sold off so badly last week (28% on Friday) in particular, because the social media company once again chose not to hand out guidance for the following quarter. Its revenue miss that stole the spotlight was extremely slight.

The $1.25 per share expected on Tuesday is above the $1.21 that Alphabet reported in Q2, but well down from Q3 2021 when heavy work-from-home ecommerce demand led to $1.40 per share. Expectations for this quarter call for a YoY drop of 10.7% in EPS.

That seems a bit pessimistic since we know that the board approved a $70 billion share buyback scheme this spring. Since Alphabet purchased more than $15 billion worth of its own shares during the second quarter, we might expect that a much larger buyback took place during Q3 as the share price sagged. Stock buybacks, especially at this scale, improve EPS readings as the denominator is reduced. Alphabet has repurchased nearly $55 billion worth of shares over the past year, though GOOGL stock is down almost 31% year to date.

Analysts will assuredly ask management for further details in its proposed investment in Cohere. On October 21 news emerged that Alphabet was considering a $200 million investment in the AI language processing software startup. Cohere's tech could be used in future chatbots and other consumer-facing applications. Nvidia was also said to be pursuing an investment in Cohere.

Alphabet's YouTube became the most prominent streaming provider in US homes in September. The data from Nielsen shows that in September YouTube held 8% of average TV usage, while Netflix (NFLX) had just 7.3% of usage. Streaming is now larger than cable with 36.9% TV usage on time, while cable held a 33.8% share, and network television took 24.2% of TV usage. Expect this data to lead to better-than-expected earnings from the YouTube segment of Alphabet's Q3 report.

Alphabet stock forecast

The weekly chart shows that GOOGL stock is stuck right in between prominent support and resistance bands. Now just above $101 a share, a supply zone between $116 and $122 that came alive between May and August should both give bulls an idea of where to take profit and provide them with a reality check that these beaten-down shares do not have more than 20% upside in the near term.

On the downside, Alphabet stock is looking at solid support from the period between November of 2020 and February 2021. This band runs from $85 to $92. GOOGL shares were already nearing this zone when they fell below $96 over the past month on two occasions. Until the macroeconomic worries of inflation and recession recede from view, Alphabet stock is likely to trend between these two regions for some time. 

GOOGL weekly chart