Alphabet Inc (GOOGL) Finds Growth in AI and Mobile

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You would think that irrelevant ads on mobile devices and desktops would go away, yet Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) defies that belief. The search engine giant is as relevant as ever, and its targeted advertising model is a favorite for advertisers and marketing teams.

Alphabet Inc (GOOGL) Stock Finds Growth in AI and Mobile

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Near a yearly high and at a price-to-earnings ratio of around 31 times, the company faces no headwinds. Competition from Facebook Inc (NASDAQ:FB) is hardly a concern, even after GOOGL’s weak Google+ offering.

Alphabet’s Electronic Money Business

Google’s Gmail for the web now allows for sending money from within the Android app. This could threaten PayPal Holdings Inc (NASDAQ:PYPL).

For now, though, PayPal need not worry. Google users may not even know about this money-transferring features. PayPal’s branding is so solid that it, along with investors, should not expect an erosion in its business. So, Google Wallet, and even Apple Inc.’s (NASDAQ:AAPL) Apple Pay, have too little of the market share in electronic payments at this time.

Still, GOOGL’s foray in this business is a necessity. It cannot rely entirely on advertising for all of its revenue.

Despite Google and Facebook dominating the digital advertising space, Google’s reliance on ad clicks is a clear risk. In the fourth quarter, the company faced higher hardware costs, as it invested in the new Pixel phone, Daydream View Virtual Reality and Google Home.

But the good news is that Google’s revenue growth of 22% year-over-year to $26.06 billion allows the company to invest. Investors are hardly worried: the stock bottomed at the $800 per share range on Feb. 1 and has surged over $860 a share.

Increasing ad content to grow profit margins brings risks for GOOGL shareholders. Google’s search results will worsen if it continues pushing too many paid ads or its own services before it connects the user to the proper search results. Just do a search for a “car,” The search results display at least five ads before the useful results show up below them. On the desktop, this is not entirely unusable because the user gets the results on one screen. On mobile, the ads add to scrolling time for the user. The more frustrating the user experience, the more likely users will start abandoning Google.com in favor of Microsoft Corporation’s (NASDAQ:MSFT) Bing or DuckDuckGo.

Growth in Mobile

Google’s focus on high-end hardware, notably the Google Pixel phone, ensures the company is at the forefront of mobile. Google Assistant is the key software solution in the hardware. And it lets GOOGL stock continue its development in AI solutions. Microsoft’s Cortana and Apple’s Siri are the competitors to the Assistant.

Pixel is still in the early phases of hardware development. Since Google puts an emphasis on the user experience, future iterations will only offer a better experience. So this will result in users spending more time using Assistant, Google Search, and other Google apps:

“In terms of Google Assistant on the Pixel along with how search works, I think definitely it gives us a way to iterate and move faster and make sure it’s working better for users. Our thesis is that as we make it easier for users to have Google at their fingertips across what they are doing and including many modes whether they are typing or asking Google a question, we find that it overall benefits.”

Source: SA Transcript

Trading GOOGL Stock

Having the highest weighting with GOOGL stock may lead to a 3.6% total return in 30 days.

This company as the only tech holding in a portfolio is enough to give investors a healthy exposure to the sector.

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Alphabet does not have any major headwinds ahead. The healthy economy is driving advertising spend. Advertisers are spending more in digital marketing and have only Facebook or Alphabet as their primary options. That will just lead to more sales for Alphabet.

As of this writing, Chris Lau did not hold a position in ant of the aforementioned securities.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get actionable insight to achieve strong investment returns.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/alphabet-inc-goog-stock-growing/.

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