Alphabet Inc (NASDAQ:GOOGL) stock is in its worst funk in more than a year. Since breaching the $1,000-per-share mark in June, GOOGL stock has spent the last three months either stumbling or running in place, falling as much as 8.5% at one point. The slump isn’t likely to last much longer.
3 Reasons for a GOOGL Resurgence
For one, Google is coming off an abnormally weak quarter for profits, with a $2.74 billion fine from European antitrust regulators weighing heavily on the company’s top line. Aggressive spending on marketing its burgeoning cloud business, and to promote some of its hardware, is expected to lead to negative EPS growth again in the current quarter. The decline, however, shouldn’t be nearly as dramatic as the 28% drop-off in the second quarter.
The company expects to return to profit growth in the fourth quarter and improve earnings per share by 30% next year. If true, it would be Google’s highest annual EPS growth in a decade.
Second, GOOGL stock is starting to look much better from a technical standpoint. It’s trading right at its 50-day moving average for the first time since July after three weeks of gains. Given the stock’s up-and-down nature over the past three months, that doesn’t guarantee much. But the short-term trend is in GOOGL’s favor.
Third, Alphabet is such a diversified, prolific tech company that there is never a shortage of new products—and, from an investor perspective, new potential catalysts—in the hopper. What was a search engine-only company is now expanding into areas like virtual reality (a standalone headset is in the works), self-driving cars, and the Internet of Things (e.g., The Google Home smart speaker debuted last year, with a second-generation version set to launch in the coming months). Any of those new products could spark a rally that sends GOOGL shares back above four digits.
Alphabet is the New Apple
As a company, Alphabet (along with Amazon.com (NASDAQ:AMZN)) occupies a space that Apple (NASDAQ:AAPL) used to. It’s one of the most prolific innovators on the planet with a bevy of products that pack plenty of “wow” factor for consumers and investors alike. While Apple under Tim Cook has become primarily an iPhone factory (for now), Alphabet keeps investors guessing at what it might come out with next. That instills confidence in its long-term viability and makes GOOGL stock one of the most desirable equities in any long-term portfolio.
This is Google we’re talking about! Not only is the company one of the more respected, diversified and universally recognized brands in the world, but GOOGL stock has been virtually impervious to extended downturns in recent years. The last time a GOOGL slump went on this long was in the first half of 2016. In the 13 months since, the stock is up 19% even with the recent drop-off.
Wall Street wants to swoop back in and pump GOOGL back up to $1,000. Investors are just looking for a reason. With a company as reliable and strong as Google, it won’t be long until they have one—especially in a bull market.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
