• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Technology

Alphabet Is One of 10 Stocks We Hate for October

Analysts will probably need to lower their estimates on the company.
By JIM COLLINS
Oct 04, 2017 | 11:00 AM EDT
Stocks quotes in this article: TSLA, GOOGL

I was tasked by Real Money's editors to identify two stocks that I believe will decline in October. The two I picked weren't chosen because of the potential for exogenous shocks, calamitous market crashes or other such October surprises. No, I believe they will decline next month due to the most basic of fundamental stock catalysts: quarterly earnings reports. 

My first pick was Tesla (TSLA) . My second pick is also earnings-related. Alphabet's (GOOGL) third-quarter earnings conference call is set for 4:30 p.m. ET Oct. 26. I believe Alphabet management, and specifically CFO Ruth Porat, will continue to note that traffic acquisition costs (TAC) are rising faster than revenues. This margin pressure was evident in second-quarter earnings, as Google search revenues rose 21% and TAC rose 28%, and I believe that margin compression will continue. (Alphabet is part of TheStreet's Action Alerts PLUS portfolio.)

Analysts seem to prioritize revenues vs. costs when analyzing Google, but Porat was clear that cost pressures will continue. 

She also noted this on the second-quarter conference call: 

"A couple of Google reminders for the third quarter. Headcount additions tend to be seasonally high in Q3, because that is when we bring on new graduates. In addition, please keep in mind that our marketing costs are typically weighted more heavily toward the back half of the year due to the holiday season...." 

According to Zacks, only two of the 17 analysts following GOOGL have revised estimates in the last month -- one in each direction -- so there really has not been a reaction to Porat's comments. I believe that is in error, and I believe analysts will have to lower those estimates -- current consensus EPS is $30.94 for 2017 and $40.61 for 2018 -- in reaction to Alphabet's third-quarter results. Downward revisions generally lead to downward movement in share price.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins had no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Technology | Earnings | Stocks

More from Technology

For DOCS, the Writing Is on the Wall

Bruce Kamich
Aug 5, 2022 2:49 PM EDT

Doximity has not finished its decline, according to the charts.

Lost in Space: Virgin Galactic Continues to Come Down to Earth

Bruce Kamich
Aug 5, 2022 11:47 AM EDT

A trip to Necker Island may be a better investment here.

Twilio Trips Over Its Outlook: Can It Regain Its Balance?

Bruce Kamich
Aug 5, 2022 8:22 AM EDT

Let's check out the charts for its next move.

Oil Is Out, Tech Is In, but You Knew That Already, Right?

Helene Meisler
Aug 5, 2022 6:00 AM EDT

As energy is drained, someone told me this week how tech is now the long trade. Where have I heard that before? Also, let's look at the risks of the tech comeback.

Here's Why Apple Has Me Nervous About the Stock Market

Bruce Kamich
Aug 4, 2022 11:36 AM EDT

You may recall what I recently wrote about Costco.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:24 AM EDT PETER TCHIR

    Jobs Report Reaction: Incredibly Strong, But Questions to Ask

    An incredibly strong July jobs report. Not only d...
  • 08:54 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The Secret to Dealing With FOMO
  • 03:51 PM EDT REAL MONEY

    AMD Second-Quarter Earnings Live Blog

    Real Money's Eric Jhonsa covers 's second-quarte...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login