What About Alphabet (GOOGL) ? What about them? Did not we just cover this name two weeks ago in response to the firm's third quarter earnings release? Yes, we did. As you may or may not have noticed, this firm has a way of keeping itself in the news.
Result: readers will recall that Alphabet missed EPS expectations quite badly on consistently robust revenue growth. The squeeze on margin came from higher effective tax rates, a significant loss in equity investment (probably at least partially attributable to Uber (UBER) ), a legal settlement in France, and a fast growing payroll. The quick positives were the firm's massive cash position that supports the firm's aggressive share repurchase program. I mentioned two weeks ago, that all told the firm still operated at quite a high level, but continued to face political/regulatory risk.
First Things First
You'll recall that we offered a trade idea to readers that day. The example used was a bull call spread (+ Jan $1300 call, -Jan $1350 call) that in minimal lots would have required a net debit of $17.00 or $1,700. GOOGL shares were trading around $1271 at that time. This morning the shares have been bouncing around $1295, after hitting $1322 less than a week ago. If one went in on that example and did not get out at last week's favorable levels, that trader could still cover (-Jan $1300 call, +Jan $1350 call) the original bull call spread for a net credit of roughly $22, or $2,200. A 29% profit in a couple of week is not so bad, is it?
By now, all must have heard of "Project Nightingale." News broke on Monday that Alphabet's Google had announced a cloud computing deal with Ascension, a St. Louis-based Catholic non-profit operating 150 hospitals and more than 50 senior living facilities across the U.S. That day, the Wall Street Journal reported that Google had been accessing and analyzing patient data without the knowledge of said patients or their doctors. The aim is to ultimately use big data in a way that increases efficiency, and improves results for these patients. Ascension did note that this partnership is in compliance with the HIPAA data privacy act.
Needless to say, the news raised a few eyebrows and by Wednesday, Google had been left in the position of confirming a federal inquiry into this deal. What's in focus here is that there is concern among regulators over whether or not the personal information of patients is adequately protected. Is there a problem? I am no legal expert, but I am a trader, and as a trader, the optics here are awful. Especially here in late 2019, where nobody seems to trust big tech, or the FANG names.
But Wait, There's More
With all of this "other excitement", the news that state level officials met in Denver in private on Monday. The deal here? A couple of months back, 48 of our 50 states opened an antitrust investigation into Google focusing on advertising practices. The states are trying to gain a better understanding of Google's businesses, and if there are violations that they need to be aware of. This is separate from and parallel to the antitrust probe into the company at the U.S. Department of Justice, and in addition to the House Judiciary Committee antitrust inquiry.
(See what Jim Cramer said about Google, here.)
What did Jim Cramer say in the above piece? The long knives are out? Wish I had thought of that.
No. The stock may go higher. I just don't care. I don't want it in my portfolio.