Why Alphabet Investors Should Prepare for Falling Profits

The effects of COVID-19 have not left tech stocks like Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) unscathed. Two analysts recently lowered their forecasts for the Google parent due to an expected drop in ad revenue. This comes after companies such as Twitter backed away from guidance amid the decline in advertising spend. While short-term uncertainty in ad spending will likely not change the long-term outlook on Alphabet stock, investors may have to brace for lower profits in the near term as the world economy works through the economic effects of the pandemic.

SunTrust Robinson Humphrey analyst Youssef Squali reportedly cut his one-year price target on the tech conglomerate from $1,600 to $1,350 per share. The stock closed March 27 at $1,110. Squali also reduced his estimate for 2020 earnings down to $34.59 per share. The estimate had previously stood at $49.08 per share. He also expects the effects to linger into 2021. Squali cut his 2021 profit estimate from $57.35 per share down to $42.87 per share.

The analyst believes the ad environment will likely remain weak until at least the fourth quarter of 2020. He also notes "murky" visibility on exactly when a comeback will take place.

Source Fool.com