Direxion's GOOGL-Focused Bull And Bear Funds Grab The Limelight Ahead Of Alphabet's Earnings

As one of the top technology enterprises in the world, Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) will command a massive audience when it releases its second-quarter earnings report on Wednesday, July 23, after the closing bell. Analysts will be looking for earnings per share of $2.17 on revenue of $93.72 billion, a sizable lift from the year-ago quarter's print of $1.89 and $84.74 billion, respectively.

Undoubtedly, artificial intelligence will represent a hot topic for Alphabet, which owns the Google ecosystem. Earlier this year, the company revamped its iconic search engine, introducing an AI chatbot-style feature, thereby competing directly with competitors like OpenAI, which developed the popular ChatGPT. Notably, Alphabet CEO Sundar Pichai labeled the move as a "total reimagining of search."

This improvement couldn't have come soon enough, with the tech giant absorbing criticism for lagging in AI development. As part of a broader response, Alphabet has upgraded its Gemini AI model, stating that the latest 2.5 version outperforms rivals in key benchmarks.

Another core area that Alphabet has historically relied on in prior earnings seasons is its financial resilience. At the moment, the company sets a high standard across several metrics, including net margin of 38.28% and return on equity of 10.3%. These stats demonstrate robust profitability, effective cost control and efficient utilization of shareholder capital.

Still, not every factor is aligned favorably for GOOG stock. One particular area that stands out as a risk factor is rising privacy concerns. While Alphabet recently announced that Gemini will be able to interact more easily and seamlessly with user devices, the tech stalwart's decision to expand its AI model's access to critical apps has sparked much debate.

According to the Pew Research Center, most Americans are concerned about how corporations and government agencies collect data on them. In addition, most survey respondents expressed confusion about what these entities do with the collected data.

Finally, while generative AI represents an obvious growth market for the tech industry, Alphabet isn't the only player. Late last month, news surfaced that social media giant and tech powerhouse Meta Platforms (NASDAQ:META) was exploring the acquisition of voice-cloning AI startup PlayAI and some of its employees. With the rivalry among the major innovators becoming even more frenetic, Alphabet faces serious pressure.

The Direxion ETFs: With clashing narratives ahead of Alphabet's earnings report, market speculators have ample opportunities to play both sides of the field with Direxion's GOOGL-focused exchange-traded funds. For the optimists, the Direxion Daily GOOGL Bull 2X Shares (NASDAQ:GGLL) seeks the daily investment results of 200% of GOOGL stock. On the other hand, the Direxion Daily GOOGL Bear 1X Shares (NASDAQ:GGLS) seeks 100% of the inverse performance of the namesake security.

In both cases, Direxion ETFs offer a convenient mechanism for speculation. Typically, those interested in using leverage or initiating short positions must engage the options market. However, financial derivatives tend to have complexities that may not be suitable for all traders. In contrast, Direxion ETFs can be bought and sold like any other public security, thereby easing the learning curve.

It's important to realize, though, that these products are not without the real possibility of financial loss. Indeed, Direxion ETFs carry unique risk profiles that must be considered before participation. First, leveraged and inverse funds tend to be more volatile than standard ETFs tracking benchmark indices like the Nasdaq Composite. Second, these specialized products are designed for one-day exposure. Holding beyond the recommended period may expose investors to value decay due to the daily compounding phenomenon.

The GGLL ETF: Since the start of the year, the GOOGL bull fund lost slightly more than 18%, amplifying the red ink of the underlying security.

• Since early April, the GGLL ETF has been on an upward trend, with the price action popping above the 200-day moving average.
• Although the upward trend is encouraging, prospective investors should note that volume since May has not been confirming the optimism.

The GGLS ETF: Although a stronger relative performer, the GOOGL bear fund is also down for the year by a margin of 2.13%.

• While the GGLS ETF got off to a strong start, the momentum in the bear fund was stunted in April, leading to a conspicuous erosion.
• Though the price action is below key moving averages, it's also possible that the bearishness is nearing an exhaustion point.

Featured image by ASPhotohrapy on Pixabay.

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