Alphabet Inc (GOOGL) Stock Is Still a Top Tech Stock


I’m a firm believer in Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL). In the markets, there is an elite group of companies that define their respective industries. For example,, Inc. (NASDAQ:AMZN) owns e-commerce, while Facebook Inc (NASDAQ:FB) has forever changed social media. And for now, Apple Inc. (NASDAQ:AAPL) is the king of smart devices. But in my humble opinion, GOOGL stock tops them all.

Alphabet Inc (GOOGL) Stock Is Still a Top Tech Stock

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Don’t get me wrong as this is not a slight against any of the above companies. Just let me forward a very basic observation — all these other names essentially require the internet to function. If not directly, then certainly, access to the internet represents their core marketing message.

But what happens when you own the internet? That’s a theoretical question to everyone except GOOGL.

As I mentioned in a prior contribution, the dominance of the GOOGL search engine is unparalleled. The margin between Alphabet Inc and the next biggest competitor, Bing, is a whopping 300%. It just gets worse as you go down the rankings. By the time you hit fifth place, it’s just not even worth considering. In any other industry, such a statement would be the death knell for the competition.

Essentially, GOOGL stock is an investment in life itself. Many people thought that the name change to Alphabet — a play on the financial term “alpha” and the gambling term “bet” — was cheeky and a bit ridiculous. But it also signified that Alphabet Inc could do whatever it wants because no one can stop it. GOOGL stock was essentially either an asset or a threat, depending on your perspective.

Volatility Is a Risk to GOOGL Stock

Unfortunately, where it matters most for investors, GOOGL stock hasn’t always shown its best stuff. True, it’s early into 2017, and so far, it’s up over 4% year-to-date. Keep that up every month and you’re guaranteed a stellar annual return. But Alphabet Inc has also been inconsistent, as InvestorPlace contributor Chris Tyler points out. For example, GOOGL was looking at closing January at over 6%. Instead, it only secured 1.4%.

On a strictly nominal basis, that’s not much of a swing. But on percentage basis, it’s a much different story. It has been well over a decade since Alphabet stock introduced itself to the markets. The crazy dynamics involved in a fresh tech company should be over by now. Today, GOOGL and its subsidiaries are comparable to General Electric Company (NYSE:GE) if GE was a little more hip.

But with great size comes great envy. Alphabet Inc now faces a fundamental problem. Oracle Corporation (NYSE:ORCL) wants to reengage a court ruling that went in favor of GOOGL. At issue is the company’s generous use of Oracle’s Java software in order to design the Android operating system. GOOGL contends that using Java — which is open-source — is fair game. Oracle contends that it violates the “fair use ” component of copyright law.

For those that acquired GOOGL stock, it’s an ugly situation that might be a legitimate risk. Here’s the thing — whether it’s legitimate or not doesn’t matter. If the markets think it’s a problem, it’s a problem. That makes the sighting of what appears to be a bearish head-and-shoulders pattern (between early December until now) a curious development.

Don’t Panic on Alphabet Inc

Generally, it’s not the best idea to buy an investment with baggage. Certainly, it’s not a good idea when the baggage is from a giant company like Oracle. Ditto that for its 6’3″ CEO that doesn’t come off as someone you want to mess with. In other words, GOOGL stock has some challenges.

I also don’t think it’s a coincidence that the head-and-shoulders pattern is emerging right now. If I’m looking at Alphabet Inc purely as a swing trade, I wouldn’t go full bore at this juncture. I expect shares to at least test its 50-day moving average, which stands just under $800. It would not shock me, however, to see GOOGL stock slide towards its 200-day moving average, which is around $763.

Again, that’s looking at Alphabet Inc from a short-term perspective. For those that have a wider time horizon, the king of the internet is as strong technically as it is fundamentally. Aside from some bumps in the road, GOOGL stock is enjoying clear blue skies. Most importantly, those bumps have never affected Alphabet Inc in a permanent way.

The bottom line here is that I would be content holding GOOGL stock. Further, any dips are justifiable buying opportunities, not mere contrarianism for its own sake. Alphabet Inc is going to $1,000 — just try to ignore the turbulence as best you can.

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

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