To be fair, I did say that Google was facing some challenges when I picked the stock back in December.
“Facebook is nipping at its heels in the online ad race. The social network has been particularly aggressive on the video front, which could be bad news for Google’s YouTube…And some investors may be growing tired of Google’s seemingly wanton spending on acquisitions and research and development.”
But this phenomenal company seems poised for more big gains. Forget about all the negative attention that GOOGL gets for possibly spreading itself too thin with investments in things like driverless cars, wearable tech and drones.
Search is a multi-billion dollar cash cow that isn’t going away anytime soon. And it’s increasingly important on mobile devices — a trend Google is perfectly prepared to capitalize on thanks to Android.
Then there’s YouTube. Video advertising is finally ready for prime time. Video ads were clearly one of the main things that led Verizon to buy AOL. And let’s be honest. YouTube is a much bigger and better platform for video than AOL.
Bottom Line on GOOGL Stock
As I said back in December:
“Yes, an investment in Google is a big leap of faith. You are trusting that Larry Page, Sergey Brin and Eric Schmidt will continue to do the right thing for the company for the long-term. That means that they may do things that hurt profits in the short run.”
We saw the results of that long-term decision-making this past quarter.
But GOOGL stock, at 17 times 2016 earnings estimates, is still attractive. And the company has more than $65 billion in cash. Here’s hoping they just don’t blow it on a silly acquisition (Twitter, anyone?).
As of this writing, Paul R. La Monica did not hold a position in any of the aforementioned securities
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