There is no shortage of stocks that have left investors under water in 2020. Some have clawed their way back from the worst of the damage done during the March market selloff. However, very few have bounced back to the point that they’re in positive growth territory for 2020. Despite legitimate concerns about the weakness of ad revenue during the novel coronavirus pandemic, though, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has performed well. And GOOG stock is one of those rare picks that is in positive territory for 2020.
That resiliency against the most damaging series of events to hit the stock market in decades is a testament to Alphabet’s strength. And it’s further proof that GOOG belongs in your portfolio.
Shrugging Off Negatives, From Coronavirus to Antitrust Fines
All companies have had to deal with unprecedented challenges in 2020. The coronavirus, an oil price war and record unemployment are wreaking havoc. The big question about Alphabet was how badly Google ad revenue would be hit. Amid reports that ad spending was “falling off a cliff,” analysts warned that Google and Facebook (NASDAQ:FB) faced a combined $44 billion hit to their advertising revenue in 2020. Considering that Google’s ad business historically accounts for roughly 85% of Alphabet’s total revenue, this was a big concern.
In March, the company did note it was seeing “weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19.”
However, when it reported first-quarter earnings at the end of April, Alphabet had a pleasant surprise for investors. Revenue was $41.16 billion, beating analysts estimates and increasing 13% year-over-year.
Bolstering Alphabet’s bottom line were some of its other businesses. For example, video streaming and video conferencing during the lockdown have been driving demand for cloud services. Google Cloud (which the company claims is now the fastest-growing cloud service) also posted revenue of $2.8 billion and growth of 52% for the quarter.
The long push to get Chromebooks and G Suite into the education market is paying off as well. As students graduate, they are familiar with the Google products. That’s helped to start carving out territory in the business market from Microsoft (NASDAQ:MSFT). In April, it was reported that G Suite paid subscriptions have now passed 6 million.
Just how resilient is Alphabet to blows that would cripple other companies? From the start of 2018 to 2019 — a period that saw Google slapped with three massive antitrust fines by the EU, including one for a record-setting $5 billion — GOOG stock still gained more than 30%. And so far this year, GOOG stock is up by 8.2%.
The Right Time for Consolidated Leadership
One of the challenges for Alphabet in the past is fragmented leadership.
Sundar Pichai has been CEO of Alphabet since 2015. However, Google co-founders Larry Page and Sergey Brin held onto the CEO and president roles of parent company Alphabet.
That changed last December. Page and Brin stepped down, and Sundar Pichai assumed the role of CEO at Alphabet as well as Google. That was good news for investors, and the timing couldn’t have been better. Pichai is very respectable as a leader. There’s an expectation that he’ll bring a more focused approach to Alphabet, looking at costly “moonshots” with a critical eye.
Thar said, having a single CEO responsible for Alphabet and Google strategy has also helped keep the ship on course during the crises of 2020.
Bottom Line on GOOG Stock
There are plenty of stocks to avoid at this point. Between the coronavirus pandemic, oil price wars, social unrest, record unemployment and a recession, many companies are in trouble. Shareholders in some of these companies may be waiting years for their investment to recover. They may lose it all, too, with some of these stocks swirling the drain toward bankruptcy.
Nonetheless, Alphabet is a safe haven during these troubled times. The company has all the bases covered, from the reliable (and massive) Google ad revenue, to the rapidly growing Google Cloud services. Its Android operating system also continues to dominate mobile phones, driving users to Google services. Chromebooks and G Suite are dominating the education market and gaining ground in enterprise adoption. Alphabet is a player in future technology including self-driving cars, AI, urban technology and health research.
Overall, with Sundar Pichai now the CEO of both Google and Alphabet, all the pieces are in place. Yes, these are trying times, and many companies won’t survive and many more will spend years recovering. However, Alphabet is a safe bet to continue thriving — making GOOG stock a solid growth investment.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.