GOOG Stock: Important Chart Shows Where Alphabet Inc. is Going Next

GOOG StockGOOG Stock Earnings Preview

Alphabet Inc. (NASDAQ:GOOGL) stock expected to report Q2 earnings on July 28, 2016, after the close. Shares of GOOG stock are down 1.8% year to date, underperforming its benchmark index the NASDAQ which is up 2.6%. Earnings have a tendency to gyrate stock prices. The big question on investor’s minds is regarding size of the move and the direction. If you nail these two factors it could be a very profitable venture.

We can never know without a doubt how a stock will react to earnings, but if we find answers to the following questions, it may help with determining a bias.

What is GOOG Stock’s Earnings Track Record?

If we break down the previous earnings reports we can see management’s track record with regards to analyst’s earnings estimates. A solid track record would give us confidence going into earnings, and shoddy track record would leave us anxious.

Then news is mixed at best. Alphabet does not boast the best record of beating on the bottom line. Over the last 23 quarters Alphabet beat estimates 12 times, and missed estimates 11 times. The news doesn’t get any better when we look as Alphabet’s top line. Over the last 22 quarters, revenues beat consensus estimates 9 times, and missed estimates 13 times.

The current trend leaves much to be desired. It is hard to even believe GOOG stock has performed so well given managements inability to match analyst’s estimates. The odds of beating earnings are no better than a coin toss.

How Did GOOG Stock Perform Post Earnings?

The following chart illustrates the reaction of GOOG stock post earnings.

Alphabet Inc. NASDAQ Chart

Chart Courtesy of StockCharts.com

  1. October 22, 2015. Alphabet reported earnings of $7.35, beating consensus estimates by $0.14. They posted a beat on revenue estimates. Post earnings GOOG stock gapped up and closed the day up 5.6%
  2. February 1, Alphabet reported earnings of $8.67, beating consensus estimates by $0.59. They posted a beat on revenue estimates. Post earnings GOOG stock gapped up and closed the day up 1.3%.
  3. April 21, Alphabet reported earnings of $7.50, missing consensus estimates by $0.46. They posted a Miss on revenue estimates. Post earnings GOOG stock gapped down. And closed the day down 5.4%.

Options implied volatility is suggesting a move post earnings of 5.7%, this number is inline with previous quarters. If we assume the same outcome, we can expect a close in the share price of GOOG stock up or down $43.50.

It is worth noting that in bullet points one and two, GOOG stock gapped higher and closed near the lows on the day. This type of actions portrays investors selling into strength caused by better earnings. Traders call this price action fading the move; I wouldn’t call it a bullish indicator.

What is the Current Trend of GOOG Stock?

The long term trend is illustrated below.

Alphabet Inc. NASDAQ INDX

Chart Courtesy of StockCharts.com

GOOG stock has been in a long defined uptrend since the day it started trading. The trend is from the lower left to the upper right. Nothing is suggesting that this trend will end any time soon.

The short term trend is illustrated below.

Alphabet Inc. NASDAQ

Chart Courtesy of StockCharts.com

The short term trend paints a slightly different picture. GOOG stock has been trading in a sideways consolidation for approximately nine months. The range is bound by $680.00 and $790.00. A sustained close above or below these levels will dictate the next move in the stock.

Bottom Line on Google Stock

GOOG stock has much to be desired when it comes to any consistency with regards to Earnings. When they do beat earnings the trend has been to fade the opening move higher. The long term trend is very much in force, but in the short term, GOOG stock is caught in a sideways range. My expectations are for shares to close up or down 5.7%. The long trend is suggesting an upward bias. If shares are able close above $800.00 it will signal the next move higher in GOOG stock.