The Next Big Thing for Alphabet, Inc. (GOOG, GOOGL) Stock

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With Alphabet’s (GOOGGOOGL) overwhelming control of Internet search and mobile operating systems, along with a juggernaut of an advertising business, investors often ask what is the next industry for GOOGL to disrupt.

The Next Big Thing for Alphabet, Inc. (GOOG, GOOGL) StockAlphabet has its hand in just about everything, even broadband Internet and wireless phone services. As a result, the opportunities for growth are vast.

However, in looking at what could be an immediate driver for its stock, Google Inc. looking to make self-driving cars an Alphabet company certainly rank atop the list.

Google Pushes Forward With Self-Driving Cars

Google’s interest with self-driving technology is well-documented, but what’s still unclear is how exactly Google plans to use the technology to make money.

After years of research and testing on California roads, Google appears ready to take self-driving cars from idea to reality.

Just recently, Bloomberg reported that the company will make self-driving cars its own segment within the Alphabet umbrella of businesses. What this means is that soon there will be actual revenue, and perhaps profits, to report from this technology; and that’s one reason it ranks atop the list of catalysts to drive GOOGL stock much higher.

What Will Google Do?

With that said, not all of the details are known regarding Google’s exact plan for self-driving cars.

What we do know is that Google is a company with operating margins of more than 25%, whereas the manufacture of vehicles is a single-digit margin business. Therefore, it could actually be hazardous for GOOGL stock if the company were to enter the manufacturing of self-driving cars, having to invest billions of dollars at low margin with a high probability of failure.

Instead, Google will do what it always does, emphasize software and partner with as many auto manufacturers as possible to implement its self-driving technology into new vehicles, and it’s proof positive that both GOOGL and Ford (F) stock are trading higher Tuesday on news of a partnership in the works.

In the U.S. alone, GOOGL has a market opportunity of 17.5 million new vehicles sales annually, all of which could be potential customers.

In essence, Google’s self-driving car business has the potential to be a Sirius XM (SIRI)-like initiative. SIRI is a business with $4.5 billion in trailing 12-month revenue that it mostly creates from in-car subscribers, offering an add-on service at prices that are typically below $15 per month.

Google might very well follow a similar business model, offering its customers a subscription package for self-driving technology. Or it might elect to go with licensing sales, hoping to capitalize year-after-year on new car sales at a one-time cost to new car buyers at a higher price point.

An Underlying Catalyst for GOOGL

Nonetheless, Google does not typically enter businesses without there being some piggyback opportunities for its ecosystem.

For example, the connected car is becoming one of the biggest growth drivers for wireless companies, mainly AT&T (T) who added about two million connected car subscribers during its last two quarters combined.

If cars are connected to the Internet, and consumers are no longer having to waste time driving, it means consumers can spend their drive time online using Google search, Gmail, Google Maps and other GOOGL properties to drive Google’s advertising revenue higher.

Last but not least, there is also a large opportunity for GOOGL to use this technology for commercial reasons. For example, for drones (military), robotics, or even to host a fleet of Uber-like small vehicles that could actually make manufacturing worthwhile for GOOGL and Google stock.

The bottom line is that the opportunities are endless for self-driving technology, allowing GOOGL to go in many different directions over the course of many years.

As of this writing, Brian Nichols was long T stock.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/12/googl-google-stock-self-driving-car/.

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