GOOGL: Why Investors Should Be Bullish on Google Stock

Advertisement

Few stocks seem immune to the market’s weakness right now, and Alphabet (GOOGL, GOOG) is no exception. Since the start of the year, shares of the tech behemoth have slid almost 10% — a paltry 1 percentage point better than the damage done to the broader Nasdaq.

alphabet-logo-185But, Alphabet is coming off a stellar 2015. Shares of Google stock gained almost 45% — more than ten times the Nasdaq’s climb. Plus, it’s also coming off some bullish analyst sentiment — namely, a price target raise that was awarded despite the rocky start to 2016.

Last week, Credit Suisse (CS) maintained its outperform rating on Alphabet stock, while upping the price target from $850 to $900. That new level is approximately 6% higher than the median price target from the analyst community, while it represents almost 30% upside from current levels.

Should you follow Credit Suisse’s bullish sentiment and be optimistic in GOOGL, despite recent weakness? I strongly believe so. Here are three reasons why.

Upcoming Earnings

Alphabet is slated to release its next quarterly earnings report on Feb. 1. Analysts are a tad more optimistic about the results than they were a few months ago, with $8.09 on tap. That would represent nearly 30% year-over-year growth and would come on the back of stellar 43% sales growth.

Those double-digit expansions aren’t the only reason to get excited about the upcoming report, though. As you likely remember, GOOGL rebranded and reorganized itself last year. In this report, the company will break out revenue and earnings from the core Google search business (including YouTube) separately from “other bets,” as noted recently on TIME.com.

More Responsible Spending

Another part of last year’s reorg was the appointment of Ruth Porat as CFO. Porat comes from Morgan Stanley (MS) and is already showing that she will steer the company to manage its expenses more prudently and cater to Wall Street with share buybacks.

The former focus should continue to bulk up the company’s already-impressive operating and profit margins of 25% and 22%, respectively, while the latter should keep Google stock investors cheering once the market gets rolling again.

More VR

Alphabet isn’t throwing innovation aside, though. Its self-driving cars continue to make headlines, for one, while GOOGL is also turning heads with virtual reality news, including a new department and new head exec.

This is especially promising given the momentum in the space, the differentiation Alphabet has from Facebook (FB) — which is focusing on gaming, for now — and the natural tie-in to its core business model. As a Forbes piece noted:

“What Google aims to create is a critical mass of users — tens of millions and eventually hundreds of millions — for virtual reality content that will keep its advertising system humming for decades to come.”

Add it up and Alphabet has short-term promise, long-term potential, and strong fundamentals. That’s why I remain bullish on Google stock, despite recent weakness — and why you should share the sentiment.

Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/01/googl-investors-should-be-bullish-google-stock/.

©2024 InvestorPlace Media, LLC