Google's Exposure To Travel Will Impact Revenue, BofA Says

Google and parent company Alphabet Inc's GOOGL GOOGL exposure to the travel industry will likely impact total revenue as U.S. travel activity appears to have slowed down amid coronavirus concerns, according to Bank of America.

The Alphabet Analyst

Justin Post maintains a Buy rating on Alphabet's stock with a $1,600 price target.

The Alphabet Thesis

Google is the largest recipient of travel industry digital ad spend and the travel industry likely accounted for 11% of Google's total $134.5 billion gross advertising revenue, Post wrote in a note. This also implies the travel industry accounts for 9% of Google's total revenue.

Many government agencies and companies have either limited or banned travel activity and this will impact the travel sector in 2020, Post said. Prior to the coronavirus outbreak, Google's travel ad spend was likely growing at around 10% but travel revenue should fall to negative 6.7% in the first quarter and negative 10.2% in the second quarter.

The financial impact is modeled at $647 million in the first quarter and $820 million in the second quarter, or $1.5 billion for the first half of 2020. The research firm is modeling trends to improve after April and will remain under pressure through June. By July, spending activity should revert to normal.

As such, full-year 2020 revenue estimates were lowered from $190.059 billion to $188.561 billion.

GOOG Price Action

Shares of Alphabet were trading lower by nearly 3% at $1,346.40.

Related Links:

Commentary: Is 2020 The Year Of Supply Chain Risk?

Thursday's Market Minute: The Playbook Isn't Working