Google Shopping outpaced Amazon.com ( AMZN ) in same-store sales in each month in Q1, says Monness Crespi Hardt in a research note Tuesday, but the investment also notes “uncertainty on how far the European Union will go” in its pursuit of Alphabet ( GOOGL ) unit Google’s Android operations in Europe. Alphabet is set to report Q1 earnings after the close Thursday. Alphabet stock was down more than 1% in afternoon trading in the stock market today , near 777. Alphabet stock is up 44% the past 12 months but down 4% from its all-time high of 810.35, touched on Feb. 2. The EU investigation of Alphabet “ is the one area that gives us pause, given the uncertainty on how far the EU will go,” wrote Monness Crespi Hardt analyst James Cakmak in the research report. “In short, we believe Google can handle adverse rulings on the Google Shopping charges, but any forced un-bundling of Android and Google services (e.g. Search, Maps) can become a detriment to data collection and targeting capabilities.” According to a story in the Wall Street Journal on Tuesday, the European Union is preparing to file formal antitrust charges on Wednesday against Alphabet over the U.S. tech company’s conduct with its Android mobile-operating system. Google Apps Required For Android Phone Makers? The WSJ reported EU competition chief Margrethe Vestager as saying that the commission was focused on Google’s demand that smartphone makers and mobile carriers using Android load Google apps on their devices if they offer any of the company’s services — including search — on their phones. Google’s contract requires phone makers to pre-install a folder of 11 apps within one click of the home screen, the WSJ said. Vestager expressed concern that Google was shutting out rival app developers with the contracts because they prevent consumers from deciding for themselves which apps to download, the WSJ said. Google has said that consumers do have the last word about which apps they want to use on their devices, according to the WSJ. Vestager opened a formal investigation into Google’s conduct with its Android operating system in April 2015. That same month, the EU Commission charged Google with favoring its own shopping comparison service in its own search results. At that time, Google Senior Vice President Kent Walker said in a blog post that the commission’s conclusions were “wrong as a matter of fact, law, and economics.” Cakmak expects Google to report a 25% rise in paid clicks in Q1, and a 5% decline in average cost per clicks. He also said Alphabet is putting forth better-optimized mobile ads and is expanding content on video wing YouTube to “augment engagement.” “We are also encouraged by the continued strength in Google Shopping trends where same-store sales have outpaced Amazon every month in Q1,” said Cakmak. “For pricing, gains in mobile search should also translate to improving cost per clicks, while abating foreign exchange headwinds.” Alphabet’s ‘Other Bets’ Will Remain An Earnings Focus Wall Street also wants to see that the sultan of search is serious about monetizing its various so-called “moonshot” initiatives. The diverse group that Alphabet calls its “Other Bets” range from self-driving cars to smart home device maker Nest. Capital expenditures for the “Other Bets” segment are expected to increase this year, although no details have been offered yet. When Alphabet released Q4 earnings in February, the tech giant revealed that it logged an operating loss of $3.6 billion on such moonshot projects in 2015. The company broke out its spending on its search core and “Other Bets” for the first time in Q4 2015. For Q1, analysts polled by Thomson Reuters expect Alphabet to see total sales — including TAC (“traffic acquisition costs” or fees paid to bring traffic to its site) — rise 18% year over year to $20.36 billion. They are modeling EPS ex items of $7.97, up 23% from $6.47 in Q1 2015. Excluding TAC, revenue is expected to rise 19% to $16.54 billion, according to FactSet. Google, which dominates the global digital ad market, will see its net ad revenue rise 9% this year, while No. 2 Facebook ‘ ( ) net ad revenue will jump 31%, says eMarketer’s latest ad spending forecast , released in March. Amazon stock was down nearly 2% Tuesday afternoon, while Facebook stock was up a fraction. Image provided by Shutterstock .
