Needman's Laura Martin wrote in a note this week that travel-related ads -- the fourth-largest category of search ads --could take a hit as the virus continues to spread. Shares of Alphabet, the parent company of Google, closed 1.45% lower on Friday to $1,295.74.
The spread of reported coronavirus cases to dozens of countries around the world has led to a widespread decrease in travel, and in turn, spending on ads for travel-related activities, according to Martin.
"Lower customer demand in travel verticals including flights, hotels, tours, etc are lowering ad spending by travel-related companies in the current quarter our channel checks indicate," she wrote.
Martin slashed Needham's revenue estimates for the March quarter by $1 billion and $3 billion for the June quarter as a result of travel-related impacts.
That results in a lower earnings outlook: Martin issued new forecasts of $12.04 versus a prior forecast of $12.52 EPS for the March quarter, and $12 versus $13.73 EPS for the June quarter.
She added that it is possible the revised estimates are "optimistic" because they don't account for potential impacts on other categories of search, such as events or retail.
U.S. markets ended lower Friday as fears of the widening coronavirus epidemic's economic impact continued to grow. However stocks managed to end the volatile week slightly higher than where they closed the week before.
Alphabet is a holding in Jim Cramer's Action Alerts PLUS member club.