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Did Alphabet Inc Stab Itself in the Foot With Its Latest Moves?

Although questionable decisions and flawed ventures aren’t helpful, don’t dump GOOGL stock yet

No one doubts Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) juggernaut status. Despite criticisms that GOOGL stock has jumped too far beyond sustainability, we don’t see evidence of an imminent decline. Yet recent corporate decisions and new ventures have raised more than a few eyebrows.

At first glance, even the idea of thinking anything other than buying Alphabet stock seems ludicrous.

GOOGL is of course a member of the so-called “FANG” stocks, which includes Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX). While brilliant companies, tremendous hype follows them everywhere.

Still, the FANGs have all outperformed last year. And this year, GOOGL stock is off to a rip-roaring start, up nearly 13%. Many analysts have questioned or recommended selling GOOGL, and all have been proven wrong.

Despite the company’s unparalleled success, no rally lasts forever. This understanding makes Alphabet stock a curious play at the moment, to put it diplomatically.

A huge distraction is the internet giant’s decision to severely alter the terms for its YouTube Partner Program. Under the new rules, YouTube content creators will need to have at least 1,000 subscribers, and 4,000 hours of watch-time to be eligible for advertising revenue.

GOOGL states that it made the change to prevent advertisers from being associated accidentally with offensive content. To be fair, management has made content censorship a priority. But reading between the lines, it appears Alphabet caved to public outcry after a famous YouTuber posted a macabre video of a suicide victim, and mocking the entire suicide issue.

Inexplicably, after an apology, the YouTuber was reinstated into Alphabet’s revenue sharing program after initially being banned. But for the crime of not being popular enough? YouTube won’t budge on that, which is ugly PR for GOOGL stock.

GOOGL Causes Its Own Problems

Alphabet’s recent moves strikes me personally in a way that few companies can. I have a YouTube channel in which I have invested significant effort. What little money I could have made is now gone because of the actions of a dumb racist.

I won’t mince words. When a privileged white kid goes to Japan just to mock its suicide epidemic, that is pure racism. Keep in mind that last year, when another popular YouTuber posted anti-Jewish content, GOOGL responded swiftly and sharply.

Suffice to say, management reserves some leeway into what it considers truly offensive content. This is why I’m surprised that the company would risk another PR disaster for Alphabet stock by moving forward with a questionable venture.

GOOGL really wants to push their local news app called Bulletin. In theory, it’s a great idea. The company’s marketing team describes Bulletin “as a way for others to communicate information of local interest, like bookstore readings, high school sporting events, or information about street closures, for example.”

But after critics slammed Facebook for allowing Russian trolls to shape our news, Bulletin is a liability for GOOGL stock. People today are rightfully concerned about the integrity of the news they receive. Alphabet, as I just mentioned, showcases dumb racists, so long as they don’t cross the (arbitrary) line. So it’s easy to see how corruptible the Bulletin platform can be.

From a competitive standpoint, the move is redundant. People already deliver news and “fake news” on Twitter Inc’s (NYSE:TWTR) social media platform. Since Twitter fundamentally isn’t a resounding success, investors of Alphabet stock have reason to be concerned.

Don’t Give up on GOOGL Stock … Yet

If I was handing out morality awards, Alphabet would be near the bottom of my list. I have never been so frustrated and offended with a company in such a short timespan. But the markets don’t care about my emotions or anybody else’s. As unseemly as it is, GOOGL stock is still a buy.

No matter how many dumb mistakes this behemoth makes, it owns the internet. Whoever owns the internet, owns the future. It really is that simple.

Sure, these recent problems weigh on Alphabet stock, but largely in perception. In this regard, it’s similar to Wal-Mart Stores Inc (NYSE:WMT). Many patriots will implore fellow citizens to only buy American while still shopping for deals at Walmart.

I won’t back down at my indignation at Alphabet the company. But I also recognize that GOOGL stock is more than just overpaid executives making stupid, biased decisions. You may have to plug your nose, but I would still buy it.

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


Article printed from InvestorPlace Media, https://investorplace.com/2018/01/alphabet-inc-stab-in-foot/.

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