Will Alphabet Inc (GOOG, GOOGL) Whiff on Earnings Yet Again?

Alphabet Inc (ticker: GOOG, GOOGL) has outrun the market with 8 percent gains so far in 2017, and it sits just about 2 percent off its all-time closing high above $872. Thus, it might seem laughable to suggest that Google’s parent is vulnerable heading into its first-quarter earnings report Thursday afternoon.

Yes, GOOGL has run mostly unchecked since the market bottomed in 2009, but the stock isn’t always on its best behavior come earnings time, and investors are becoming increasingly bold about taking profits if they don’t like what Alphabet has to report.

The headline numbers. The growth Wall Street has come to know and love from Alphabet isn’t going anywhere, or so the analyst community believes. Wall Street has a target of $24.22 billion for revenues, which would represent 19.5 percent top-line growth for the quarter. Earnings projections aren’t promising, however, at a 1.3 percent decline.

[See: 7 of the Best Stocks to Buy for 2017.]

Alphabet has been downright miserable about clearing Wall Street’s typically low expectations. Over the past three years, GOOGL has managed to slither under the earnings bar in seven of the past 12 quarters — and even donned a golden sombrero in 2014 when it whiffed on every last report. So it’s possible that this time, the analyst community is simply trying to put a beach ball on a tee.

What’s up with Alphabet shareholders? It’s not exactly accurate to say that investors are losing patience with a stock that’s outperforming the market over every meaningful time frame, long and short term. But it is fair to say that their trigger fingers are getting itchier around earnings.

Consider that in late January, investors sold Alphabet off by nearly 5 percent in the days following a disappointing fourth quarter in which profits came up short and cost-per-click declined more than expected. Or worse, consider that a strong third quarter, in which earnings crushed estimates and revenues grew 21 percent to beat estimates wasn’t enough to keep GOOGL from losing 5 percent to double the market’s declines over the next couple weeks.

Investors aren’t punching the “sell” button on every last earnings report, and even when they do, GOOGL shares merely claw back all their losses and then some. But you must recognize the heightened risk (or dip-buying opportunity) of post-earnings backlash.

The reason for worry this quarter: Pivotal Research’s March downgrade of Alphabet stock focused on one of the biggest issues facing Alphabet this quarter: its YouTube ads, and the “objectional” content they’re often placed alongside.

Specifically, major advertisers including the U.K.’s HSBC ( HSBC) and France’s Havas ad agency pulled ads from YouTube — which was then followed by an exodus of U.S. advertisers including AT&T ( T) and Johnson & Johnson ( JNJ) — because of the video outlet’s seeming lack of control to keep their ads from appearing aside content promoting terrorism, hate and violence.

Pivotal Research’s Brian Wieser cut GOOGL from “buy” to “hold,” and dropped his price target from $970 to $950, saying, “while Google has apologized for the incidents, and while the scale of the underlying problem may be relatively small in absolute terms, for large marketers, any one instance of an inappropriate brand placement may be enough to seriously harm a brand’s business value.”

If the bulls want any reassurance, it’s how much that commentary reflects investors’ overall behavior when it comes to Alphabet. Advertisers no doubt aren’t looking to permanently ban YouTube, just avoid it until Google’s engineers do what they do and provide the improved control they want. Similarly, no matter how much the Street thumbs its nose at Alphabet amid earnings hiccups, it typically returns to a bullish stance within weeks. And why not? There are few better sources of quality in the tech sector.

[See: The 10 Best Ways to Buy Tech Stocks.]

They see what Barclays did when it initiated coverage amid the same ad brouhaha, but chose to do so at “overweight”: “The pace of innovation is high, especially as Google updates many core applications using its advanced machine learning and expands into areas like cloud and hardware.”

Given Alphabet’s history and its first-quarter headwinds, a miss and subsequent drop is entirely likely. But unless GOOGL presents evidence of a real sea change for the worst in its core businesses, expect business as usual — including a run back toward record highs in the coming months.

More earnings in focus

Microsoft Corp. (MSFT). Microsoft also will announce earnings after Thursday’s bell, as the blue-chip tech titan tries to continue its slow burn higher by reporting another quarter of decent growth. Analysts expect MSFT revenues for the fiscal third quarter to come in 7 percent higher from the previous year to $23.62 billion, filtering down to a bottom line of 70 cents per share, 12.9 percent better from the year-ago quarter. Morgan Stanley is particularly bullish at the moment, reiterating its “overweight” rating in a note last week saying it has “high conviction into Q3” thanks to revenue acceleration and gross margin stabilization.

Amazon.com (AMZN). Amazon will join Microsoft and Alphabet in reporting Thursday evening, and analysts expect more of what investors long hoped for in Amazon: not just top-line growth, but a meaningful bottom line, too. Specifically, not only is AMZN expected to post 21.2 percent revenue growth to $35.31 billion, but profits are expected to expand by 5.7 percent to $1.13 per share in its fiscal first quarter. The analyst community has been particularly bullish over the past month or so, with Needham upgrading to “buy” April 10, and Loop Capital and Barclays each initiating the stock with buy-level ratings near the end of March.

This week’s earnings calendar

Monday. Barrick Gold Corp. ( ABX), Halliburton Co. ( HAL), Kimberly-Clark Corp. ( KMB), T-Mobile US ( TMUS), Whirlpool Corp. ( WHR).

Tuesday. 3M Co. ( MMM), AT&T ( T), Caterpillar ( CAT), Chipotle Mexican Grill ( CMG), Coca-Cola Co. ( KO), Eli Lilly & Co. ( LLY), Rite Aid Corp. ( RAD), United States Steel Corp. ( X), Wynn Resorts ( WYNN).

Wednesday. Amgen ( AMGN), Anthem ( ANTM), Boeing Co. ( BA), Fiat Chrysler Automobiles ( FCAU), General Dynamics Corp. ( GD), Las Vegas Sands Corp. ( LVS), PayPal Holdings ( PYPL), PepsiCo ( PEP), Procter & Gamble Co. ( PG), Seagate Technology PLC ( STX), Twitter ( TWTR).

Thursday. Alphabet ( GOOGL, GOOG), American Airlines Group ( AAL), Baidu ( BIDU), Comcast Corp. ( CMCSA), Expedia ( EXPE), Ford Motor Co. ( F), GoPro ( GPRO), Intel Corp. ( INTC), Nokia Corp. ( NOK), Sirius XM Holdings ( SIRI), Southwest Airlines Co. ( LUV), Starbucks Corp. ( SBUX), Under Armour ( UA, UAA).