Facebook, Inc. (NASDAQ:FB) has been hammered over the past few weeks, sending shock waves through the rest of FANG: Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX) and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG). It doesn’t help that President Trump has been attacking Amazon with tweets, causing further pressure on FANG. But what does this have to do with Google stock?
While Alphabet is not directly involved in any of these issues, Alphabet stock sure is getting caught up in the beatdown. The PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) has also taken a hit, now around 8% off its highs. GOOGL stock is down too, but off an even-worse 16% from its highs set back in January.
So where does that leave us?
It leaves us with a high-quality company that’s under temporary pressure thanks to an anti-Amazon agenda by the President and the mishandling of user data by Facebook. Why should Google stock, Netflix stock and a slew of others be hurt as a result?
If all of this ends up being an overreaction, then these stocks are actually giving us a great buying opportunity, not a profit-taking scenario.
Valuing Alphabet Stock
Smart investors bought Alphabet’s 2004 IPO and never sold it. The company has become the go-to name in internet search. While its M&A strategy has been hit-and-miss over the past decade or so, its acquisition of YouTube was a home run.
Google is the most popular website in the world, followed by YouTube. Facebook comes in at third, while Amazon is all the way down at No. 10. Google isn’t done yet, though, having Google India at No. 8 and Google Japan at No. 16. Various Google country sites hold positions 23 through 27, as well as No. 32, 35, 40 and 43. And that’s just in the top 50!
In other words, Google dominates the internet. But it goes beyond that, too. Alphabet also has a formidable Google Cloud division, just behind Amazon and Microsoft Corporation (NASDAQ:MSFT).
Its “other bets” might be a drag on earnings now, but consider that its self-driving vehicle technology segment, Waymo, was once just a bet too. Not long ago, analysts valued this unit at $70 billion.
Waymo just inked a deal with Jaguar for 20,000 vehicles and has a previous arrangement with Fiat Chrysler Automobiles NV (NYSE:FCAU). It’s also working on finalizing a deal with Honda Motor Co Ltd (ADR) (NYSE:HMC). Obviously Waymo is still in its early days of growth, and thankfully, it’s got a behemoth of a company behind it to help fund its growth.
So what are the numbers like? Analysts are looking for 20.5% revenue growth this year and another 17% growth in 2019. For earnings, they expect 28% and 17.2% growth in 2018 and 2019, respectively. For this brand, future potential, and current growth profile, we’re paying a reasonable 24 times this year’s earnings.
Trading Google Stock
There’s good and bad when it comes to the Google stock chart. We’ll start with the positives because there aren’t too many of them. Google stock is holding up near $1,000 per share, a key psychological and price level as evidenced by the purple line on our chart.
The negatives are plentiful, though. For starters, Alphabet stock is now trading below all three major moving averages. While the 200-day is still technically moving higher, the 50-day has clearly turned lower, and the 100-day moving average is breaking down as well. Further, shares are below trend-line support (black line).
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Note that in February, Google stock suffered a similar breakdown, briefly tagging $1,200 and falling to $1,000 before a violent rally propelled it higher. After hitting $1,180 and falling to $1,000 again in March, bulls were hoping for a similar “V-bottom.” Unfortunately, that hasn’t been the case.
Back in February, I said Apple Inc. (NASDAQ:AAPL) is one of the best stocks investors can buy right now. I also made the case that investors should consider buying Google stock near $1,000. Multiple times over the past few trading sessions, they’ve had a chance to do that. Given its growth, valuation and brand power, I stand by that claim.
Despite the hit equities have taken over more tariff fears, Google stock is holding up near this level again.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held a position in GOOGL and AAPL.
