Tech behemoth Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) has gained more than 20% so far this year and recent days have seen the shares skyrocket after the company released stellar first-quarter results and gave the market something to cheer about. The post-earnings rally has made it a bit more expensive to buy into GOOGL stock, but investors who are looking to take a position in the firm would be wise to get in on the next pull-back, because it is on track to make its way above $1,000 per share.
One of the biggest reasons that Alphabet stock is a buy is the company’s future growth potential.
Google has been able to remain a dominant player in the online advertising space despite strong competition from the likes of Facebook Inc (NASDAQ:FB) and Snap Inc (NYSE:SNAP). Advertising revenue increased in the first quarter, which is a great sign considering that there were some questions about whether a scandal with YouTube advertisements would cause companies to abandon Google.
GOOGL Stock: Sustainable Growth Ahead
YouTube came under fire when ads with homophobic and anti-Semitic undertones ran alongside some of the site’s content. This outraged the public and caused some advertisers to withdraw from the service. The boycott worried investors because the majority of Alphabet’s revenue comes from advertising dollars.
However, that scandal appears to have had very little impact on GOOGL stock’s bottom line, something that traders are cheering about. While it’s possible that the second quarter could see a bit more of an effect from advertisers pulling away from the service, this quarter’s success reflects Google’s commitment to dealing with the issue, and for that reason, the ordeal probably won’t have the massive negative impact that was feared.
Alphabet: Investing In the Future
While success in the advertising space is the most important factor for GOOGL stock at the moment, the company’s “Other Bets” division represents the firm’s commitment to innovation and remaining a powerhouse in the tech space. Google’s “Other Bets” lost $855 million during the past quarter, which may seem like a red flag, but it’s important to remember that innovation takes a great deal of time, failure and money.
Alphabet is spending on projects that will shape the technology of the future, so it’s inevitable that the firm will lose some money before those ideas become successful.
The cloud is another place that Google is growing rapidly and management has been optimistic about its prospects in this space. GOOGL CFO Ruth Porat has said that cloud computing is one of Alphabet’s “most important strategic priorities.”
It appears that the firm’s efforts to grow in that space are paying off as well. Porat also said that the cloud division is “one of the fastest growing businesses across Alphabet.” That’s a big deal for the future of the company because that space is expected to see exponential growth in the coming decade. Google is clearly working to ensure its place in the industry, and that should help the stock deliver value for years to come.
The Bottom Line on Alphabet Stock
GOOGL stock has been on a tear recently, but for good reason. The company is certainly expensive right now, but the explosive growth isn’t over yet. The stock’s most recent rally could mean a pullback is on its way if investors decide to take profits, which would provide a great opportunity to buy in.
However, whether a dip occurs, Alphabet stock is a solid buy. The stock is likely to make its way above $1,000 before the year is over, so investors who are willing to fork out the cash now will probably see substantial returns over the next 8 months.
As of this writing, Laura Hoy was long FB.