Alphabet Inc (GOOGL) Stock Is a Giant That Still Has More to Gain

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Leveraging a market capitalization of nearly $652 billion, Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) is a big company. You obviously don’t need a doctorate degree to understand that. But too often, we tend to discuss risks inherent in massive organizations without balancing our perspectives with the associated benefits. Acknowledging both is critical to understanding whether GOOGL stock is right for you.

Alphabet Inc (GOOGL) Stock Is a Giant That Still Has More to Gain

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Last week, InvestorPlace writer Tom Taulli wrote that “GOOGL is running into the proverbial ‘law of large numbers.’ That is, with a revenue base of a staggering $90 billion, it will get increasingly harder to find new sources.” Against fierce competition, it’s more important than ever for Alphabet to “excite its creative juices,” as Taulli puts it.

I completely agree. Amazon.com, Inc. (NASDAQ:AMZN) made strides against GOOG in the search engine company’s hallmark revenue source — advertisements. That’s a constant thorn on the side that GOOGL stock investors cannot ignore. Also, as InvestorPlace contributor Lawrence Meyers notes, Amazon continues to make strong progress with its AWS could-computing platform.

No organization can afford to sit still, or let others steal their thunder. Fortunately, I don’t think this is the case at all. The mainstream media may hype the idea that GOOGL stock is losing relevancy, but the law of large numbers works both ways.

GOOGL Stock Needs the Proper Narrative

On CNBC, the narrative on the July 11 broadcast of “Closing Bell” was the clash of the titans. Amazon’s home assistance platform Echo is squaring up against Google Home. Experts claim that Amazon devices are easier to talk to. Will any of this impact GOOGL stock?

To those that were hoping to play the short game on GOOG, I’d save my capital for a different opportunity. While Alphabet needs to regain its competitive edge, focusing too much on Home won’t accrue much benefits — hence, the law of large numbers.

But at the same time, GOOGL executives aren’t going to lose any sleep if they come in second place in the sector. If it will take a massive catalyst to move Alphabet forward, it will take an equally-sized catastrophe to cripple it.

I think those that are supremely bearish on GOOGL stock are conflating catastrophes with challenges. Unlike the plotline for a Walt Disney Co (NYSE:DIS) owned Star Wars flick, Alphabet’s “Death Star” doesn’t have a grave vulnerability that can be exploited by a single, proton torpedo.

I also believe that the Amazon threat as it relates to GOOG is overhyped. Alphabet is largely staying within its role as a technology expert. In sharp contrast, Amazon has gone full-Napoleon Bonaparte.

These are two companies with similar synergies, yet they surprisingly they have distinctly different strategies. Over the longer run, this will hinder Amazon’s ability to upend GOOGL stock, if that’s even their purpose.

Alphabet Is Focused on Being Itself

Amazon shocked Wall Street last month when the e-commerce giant announced that it was buying out Whole Foods Market, Inc. (NASDAQ:WFM). Everyone knew that the company was keen on groceries thanks to the Amazon Go concept. The Whole Foods takeover seemed to many a tad bit aggressive.

Whatever the case, Amazon is clearly on acquisitive overdrive. They’re also spending considerable resources on brick-and-mortar establishments with low profit margins. That may not settle too well with some investors. Although Amazon’s top-line growth exceeds GOOGL stock, its bottom line is a totally different story. The grocery takeover attempt isn’t going to help matters.

While I agree with my InvestorPlace colleagues that Alphabet needs to step it up a notch, I’m not that concerned about the common criticisms, especially the “one-trick pony” issue. When you have 90% market share in the search engine sphere, you essentially own the internet. Everybody else is forced to fight for scraps.

That of course doesn’t apply to Amazon, which throws around considerably more weight than most competitors. At the same time, these two companies are focused on different end games. From time to time, AMZN and GOOGL stock will butt heads as the cost of doing business. But neither investor has to worry much. Just look at their respective charts. Both can be successful without killing each other.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/alphabet-inc-googl-stock-giant-still-gain/.

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