Despite a challenged ad market, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock remains resilient. But, with shares just a 100 points shy of their 52-week high, is there cause for concern for GOOG stock? Yes and no. Ad spending is picking back up after the novel coronavirus caused a sudden drop in demand. Yet, there’s still a chance we’ll see another pullback.
However, that could mean opportunity. Sure, another dip in ad spending will affect revenue in the near-term — but not by much. And with the company’s strong balance sheet, diversified revenue mix and exposure to megatrends like automated vehicles (AVs), there’s plenty of reason to make this a long-term holding.
In short, if GOOG stock pulls back, consider that prime time to buy.
If you have “FOMO” from not buying during March’s selloffs, cut yourself some slack. The story isn’t over for this tech giant, and buying on any dip could be a shrewd move in hindsight.
Don’t Miss the Forest for the Trees With Google
With investors bidding up FAANG stocks like there’s no tomorrow, investors may be pricing in too swift of a recovery for Alphabet stock. Granted, other FAANG names, like Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX), have performed even better.
However, for these two, “social distancing” has been a tailwind, not a headwind. With GOOG stock, though, the situation is a bit different. Like its rivals, shares have bounced back massively from their March lows. Yet, uncertainty remains whether the ad market can quickly rebound through the end of the year.
In short, disappointment may be around the corner. However, don’t take this to mean, “this stock is heading lower.” Instead, take it to mean shares could soon be even more of a screaming buy.
How so? A disappointing second quarter may mean shares selloff again. But that’s not a signal to dump Alphabet and head for the hills.Rather, it could mean a compelling entry point for a long-term position.
Today’s headwinds aren’t enough to sink Google. With a rock solid balance sheet, a high-margin cash cow business and exposure to future trends, don’t miss the forest for the trees with this powerhouse stock.
Flight to Quality, With Plenty of Growth Runway
Large cap tech names offer investors an interesting combination. On one hand, they provide “blue chip” level stability. With strong liquidity, consistent cash flows and high margins, these are some of the highest quality stocks out there.
On the other hand, they offer growth potential as well. Google’s dominant search business may be maturing. However, the company’s investments in what they call “Other Bets” give investors exposure to many key “megatrends.”
A prime example is their Waymo self-driving car division. As I’ve discussed elsewhere, AVs are the next big automotive innovation. But cutting edge companies like Tesla (NASDAQ:TSLA) aren’t the only ones throwing their hat in the ring.
As The New York Times reported back in March, AV industry leaders consider Waymo the “clear leader in autonomous vehicle technology.” And that’s not all. As I wrote earlier this month, consolidation may soon happen in the AV space. With Alphabet liquid enough to double-down, they could expand their share of this budding market.
In short, one could buy Alphabet for the stability and stay for the long-term growth runway. The company has plenty of places (such as Waymo) to reinvest capital from its cash cow search business. And, like how Amazon is able to “level up” time and time again, the same could happen here for this company.
Buy The Dip in GOOG Stock
Unlike some of the other FAANG names, Alphabet still trades below past highs. But, despite concerns ad market challenges continue, don’t miss out on this long-term winner because of short-term headwinds.
Simply put, Alphabet’s war chest of around $117 billion — and relatively small debt load — means the company has plenty to ride out today’s storms. And, with the search business still massively profitable, there’s enough “dry powder” to fund opportunities like Waymo.
The bottom line? Any dip in GOOG stock is a great time to pick up one of the greatest tech companies ever.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
