Source: PaxForex Premium Analytics Portal, Fundamental Insight

Over the past few weeks, companies, specifically, the big tech companies, have been reporting earnings. In 2021, Alphabet posted impressive results quarter after quarter. Whether it was the astounding growth of video platform YouTube or the pace at which its cloud computing segment is catching up with Microsoft and Amazon, investors applauded Alphabet stock, which soared nearly 70% in 2021 compared to the S&P 500's 27% return.

Throughout 2022, investors have seen a precipitous sell-off in stocks, especially technology companies. By comparison, the Nasdaq Composite Index was down more than 25% for the year. Although Alphabet's earnings for the first quarter of 2022 showed some areas of plateau growth, the company's management has hinted at several catalysts that could be strong tailwinds for the company over the long term. Let's break down the company's earnings and analyze the overall state of the business and subsequent investor sentiment after the report's release.

Overall, lockdowns due to COVID-19 have led to a surge in content creation and consumption. Not surprisingly, Alphabet-owned video-sharing site YouTube experienced an acceleration in consumer demand, resulting in more pronounced growth in ad revenue. However, streaming sites such as Netflix and YouTube are starting to show signs of weakening growth, which could indicate a slowdown in their respective businesses.

It would be short-sighted to argue that demand for streaming may be slowing due to a combination of rising vaccination rates, pent-up travel demand, and efforts to reopen across the country. While this argument is not without merit, during Alphabet's most recent earnings call, investors learned that YouTube faces stiff competition, particularly from short-form video streaming app TikTok.

At first glance, it may seem troubling that consumers are rushing to a new source of entertainment. But supporters of the opposite view might argue that the competitive threat Alphabet has faced has forced it to update its product roadmap and develop innovative features. During an earnings conference call, Alphabet CEO Sundar Pichai explained that YouTube's response to TikTok, called Shorts, is viewed more than 30 billion times a day on average - four times more than a year ago.

These statistics are encouraging because they mean that more and more users are embracing YouTube's new functionality. The second component of this strategy is an analysis of whether Alphabet can monetize these new products. It is also important for investors to understand that YouTube is not just about advertising. For the quarter ended March 31, 2022, Alphabet reported growth in YouTube's non-advertising revenue, thanks to growth in subscriptions to YouTube Music and YouTube TV.

Although YouTube will face some challenges from other social media apps shortly, Alphabet executives carefully illustrated that the segment as a whole is in very good shape, and early results from new features should inspire investors.

One of the highlights of Alphabet's first-quarter results was the growth of Google Cloud. For the quarter ended March 31, 2022, Alphabet reported revenues of $5.8 billion, up 44% from the previous quarter. Company executives explained that the strong growth was driven by an increase in both product sets in the cloud segment. In particular, strong demand for cloud infrastructure and platform services, such as Google Workspace, led to an increase in the number of seats acquired and growth in average revenue per seat.

Alphabet is showing investors that the company is doubling down on its cloud development efforts by actively hiring employees. Alphabet CFO Ruth Porat explained that of the 7,400 people hired in the first quarter, the most growth was in technical positions and Google Cloud sales. In addition, Alphabet is in the early stages of rolling out new services in the cloud, primarily in cybersecurity.

Alphabet has already acquired two cybersecurity players in 2022. As the company works to integrate these new businesses, Alphabet could well be on its way to creating a comprehensive cloud suite that will stand up to competitors.

Over the past month, Alphabet's stock is down about 10 percent and trading at 5.7, its lowest level in the past year. The company ended the first quarter with about $134 billion in cash and cash equivalents. In addition, investors learned that Alphabet's board of directors approved a $70 billion stock buyback.

As announced earlier this year during the Q4 2021 earnings call, Alphabet plans to do a stock split later this summer. As the stock trades lower, despite several encouraging catalysts and a healthy balance sheet, now is a good time to invest in the stock.

    As long as the price is below 2480.00, follow the recommendations below:

• Time frame: D1
• Recommendation: short position
• Entry point: 2334.00
• Take Profit 1: 2205.00
• Take Profit 2: 2100.00

Alternative scenario:

If the level of 2480.00 is broken-out, follow the recommendations below:        

• Time frame: D1
• Recommendation: long position
• Entry point: 2480.00
• Take Profit 1: 2635.00
• Take Profit 2: 2735.00