- Alphabet (GOOG, GOOGL) stock struggling to find footing.
- Such weakness could be systemic, so it warrants investigating.
- After a full recession, investors should add it to their shopping lists.
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock is part of the famous FANG gang. But with friends like Meta (NASDAQ:FB), Netflix (NASDAQ:NFLX) stock, who needs enemies. The drag on GOOG stock from those two is too harsh. Alphabet stock is hanging on though only down 25%, the other two are down 40% and 70% respectively. Eventually, investors will see the value in it and pounce. GOOG is still a beast in spite of current jitters. Of the FANG gang, GOOG now arguably has the cleanest opportunity for investors.
Alphabet has no apparent issues stemming from its own operation. It has enough going on fundamentally that it doesn’t need much fanfare coverage. Its monstrous financial statements do the arguing on its behalf. There are hardly any loud critics about many parts of its business. For now, GOOG is struggling because it follows the market’s lead.
| GOOG | Alphabet | $2,334.93 |
GOOG Stock is Down Through No Fault of Its Own
Yesterday, the bears crushed the buzz that happened on Wednesday. A 3% rally in the S&P 500 turned into a -4% drubbing just one session later. The NASDAQ lost 5% so it’s not alarming to see GOOG fall in kind. Amazon (NASDAQ:AMZN) and NFLX fell almost 8%. Even Apple (NASDAQ:AAPL) fell 5.6% Thursday. Clearly, there isn’t an intrinsic worry dragging GOOG down 25% from its highs.
When considering taking a trade into a rapidly falling stock, I usually need good reasons. In this case the financial reports that management has delivered would suffice. This behemoth generated $270 billion in revenues last year. Their net income was larger than their total revenues from 2015. In the process, they created a whopping $92 billion in cash from operations. All this and the value has become a bargain even by absolute terms. Alphabet’s price-to-earnings (P/E) is 22, which is 18% cheaper than AAPL.
If that weren’t enough, there is also technical reasons to expect abatement in the selling. GOOG stock is approaching areas of heavy contention. The $2,230 area served as a base for a 25% rally last May. Below that there is the $2,000 and $1,800 bases which will also lend support. This suggests that the easy fall has already happened. From here, the bears will need to work harder for more downside.
Investors Should Consider Accumulating It on Dips
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The financial evidence and the technical support suggest that there is light at the end of the tunnel. GOOG stock should become a compelling stock to own for big money firms. While the threat from the Federal Reserve to the economy is real, I think they will fail. The Fed’s mission to pour ice water on the economy will cause too much damage that it will be politically unsustainable.
Without outside negative headlines, GOOG is a stock I’d own for the long term. There are very few companies who have a better thesis than this one. They control many platforms with 15 billion daily active users. Some don’t even yet contribute much to the overall profits. Judging by my behavior, YouTube shorts will take back screen time from competitors like TikTok. This is an area that isn’t earning for the company yet. Eventually it will contribute to further ameliorate the financial success of Alphabet.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
