Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) is a stock that’s boring, until it’s not. In 2012, GOOG stock went up by single digits but then in 2013 it gained almost 60%. Then in 2014, what was then Google stock lost about 3% before gaining another 44% again in 2015 after changing its name to Alphabet along the way.
In 2016, Alphabet Inc. was up by about 8% to lag the overall stock market. So will the past trend hold, and will 2017 be a breakout year?
There are fair arguments on both sides. After all, the high-growth days of Google are behind it after the internet giant has matured to a nearly $600 billion company. Also, rival Facebook Inc (NASDAQ:FB) is now its peer in both its reach and its relationship with digital advertisers. On the other hand, bulls who like GOOG stock or GOOGL like its track record of consistent growth and innovation over the years.
So who’s right? Here’s a look at both sides of the trade with three pros and three cons to investing in Alphabet stock right now.
Pros of GOOG Stock
Growth: While the company restructured into Alphabet in 2015, Google advertising remains the biggest part of its business. And that business is good, judging by overall revenue growth of 19% this year and a projected 16% growth rate next year. Furthermore, profits will be up 16% this year and 19% next year. With continued success from its core, Alphabet can afford to look into new efforts without worrying about financial performance.
Valuation: Despite a strong history of success and projections of future growth, GOOG stock is not overvalued. Right now, shares trade for around 20 times forward earnings. That is on par with forward P/E of about 19 for the typical stock in both the S&P 500 and the Nasdaq 100. If you can get a fair price for a high-growth company like this, you should take it.
Innovation: With a fair current price and hopes of future growth, there’s a lot to like about Alphabet Inc. right now. But with constant innovation into new areas, including a “smart” contact lens that can read your blood sugar or Google Fiber high-speed internet access, there is a whole lot of future potential from GOOG stock.