Alphabet did not sparkle over the past quarter. Recently, Google’s parent company, which has suffered from pressures in the online advertising market, announced a turnover slightly below the expectations of financial analysts. Jefferies, however, maintained its buy recommendation and its price target of $130 on the stock. A target that suggests potential for stock price appreciation, based solely on fundamentals.
The brokerage reported “numerous indications of emerging macro pressures,” ranging from some advertisers withdrawing spending to lengthening cloud sales cycles. And profitability is suffering from double-digit growth in the workforce. While Google “could do better than the rest, a recession could still hurt,” warns Jefferies. Concerns that reduced the enterprise value (combined market capitalization and financial debt net of cash) to 10.5 times the operating margin before amortization (Ebitda), against a historical average of 12 times.
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What does technical analysis say?
From a technical analysis perspective, the stock rebounded off the strong support provided by the 50% Fibonacci retracement of the rally initiated in 2020 and completed in February 2022. Since then, it has been trading within the trading range (horizontal price fluctuation band) of 105.63-120.44 dollars.
The action recently sent an encouraging signal by extracting itself from the top of a medium-term bearish channel but has yet to exceed the upper limit of the trading rangecurrently reinforced by the 100-day moving average (dynamic bearish resistance) and the upper limit of the Bollinger Bands (price volatility gauge).
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Once this important resistance zone has been cleared and closed, we could aim for the rally of the resistance of 123.14-123.19 dollars then that of 124.64-127.15 dollars (reinforced by the moving average at 150 days, descending).
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Conversely, a break-down of the strong $100-$102.22 support zone would restart the bearish momentum.
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Author’s declaration of interests