When is a 14% increase in quarterly ad spending a bad thing? When it’s for YouTube.
While it was a healthy double-digit increase, it was a “deceleration” from 24% growth YouTube had in the fourth quarter of 2021, and it was the main reason Wall Street analysts attributed to a sell-off in parent Alphabet’s shares following the release of its first quarter results.
And while there were extenuating circumstances for the slowdown – including tough comparisons with even stronger year ago results for YouTube in the first quarter of 2021, as well as the disruption of brand ad spending on YouTube in Eastern Europe following Russia’s invasion of Ukraine – at least one analyst alluded to “rising ad recession anxiety” among Alphabet’s investors.
“We think revenue results were largely fine, but not enough to soothe investors' rising ad recession anxiety, nor growing TikTok competition concerns after YouTube missed again,” writes BMO Capital Markets’ Daniel Salmon, who nonetheless maintained the firm’s “outperform” rating for Alphabet’s stock “owing to diversified and durable revenue growth.”
Even so, he said BMO has “tapped down” on its target price for Alphabet’s stock “to reflect growing recession risk.”