Investors this week shrugged off news from the latest Google software developers conference, including word that the company's first Pixel watch is coming this fall. So with Google stock down some 21% in 2022, the big question now is what could put some oomph back into shares.
Google used the gathering, known as "I/O," to tout innovations across its software and hardware products driven by artificial intelligence. But shares of Google-parent Alphabet sold off just the same amid the Nasdaq's correction.
The company indicates Google's hardware business might help nevertheless. At the conference, Google said the Pixel 6 smartphone, launched in late 2021, has sold more than the Pixel 4 and Pixel 5 combined, making it the fastest-selling Pixel ever.
When the Pixel 7 is launched this fall, the first Pixel Watch also will be available. It plans to use technology from Fitbit, which Google acquired for $2.1 billion.
At least one Google stock analyst, however, isn't so sure about its prospects. In his report on the I/O conference, Monness, Crespi, Hardt analyst Brian White cited current market forces that are working against tech companies.
"We believe Alphabet will continue to benefit from the digital ad trend and experience strength in the cloud," White said. "However, the economy is flirting with a recession, the geopolitical landscape is explosive, antitrust battles are never-ending and the tech tantrum has morphed into a tech apocalypse."
Cloud Computing As A Revenue Driver
On the brighter side, Google's cloud computing business has emerged as a revenue driver. In the March quarter, cloud revenue jumped nearly 44% to $5.82 billion.
Aiming to improve transparency, Google began disclosing cloud financial metrics with its fourth-quarter report in fiscal 2020.
One problem, though, is that in order to become a possible catalyst for Google stock, the cloud business needs to turn profitable. And that still seems very far off. In the first quarter, the cloud business reported an operating loss of $931 million vs. a $974 million loss a year earlier.
Some wonder if Google might also open the books on YouTube. But whether YouTube is profitable or not remains a mystery, as is its potential for Google stock.
"(It's) unclear to me whether YouTube disclosure would be a material catalyst. Probably not," EvercoreISI analyst Mark Mahaney said in an email to Investor's Business Daily.
Google Stock Split To Boost Shares?
Another development to watch will be a planned 20-for-1 Google stock split. The split takes effect after the close of business on July 15.
The move could pave the way for the tech giant to enter the Dow Jones Industrial Average. And shares should be more attractive to retail investors.
Still, retail investors face the same questions as institutional investors in terms of whether to buy Google stock.
Alphabet's repurchase program gives some support to Google stock. Google's board of directors in April authorized $70 billion in additional stock repurchases.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
