One of the biggest pieces of news on Thursday was that Google’s (NASDAQ: GOOG) parent company, Alphabet, has now broken a $1 trillion market capitalization. Now entering the ranks of only a handful of stocks in the world to reach this point, investors are wondering just how much more room this company has to grow.
Joining Microsoft and Apple as a one-trillion-dollar plus company, Google’s been riding a wave of optimism surrounding its core business, its advertising segment, which contributes to around 85% of the company’s total revenues. While there are some issues facing the company right now, including privacy concerns and antitrust investigations from various regulators, Google’s prospects seem as good as ever, with many analysts thinking FAANG stocks (which the major tech giants such as Google) could see further double-digit gains in 2020.
“The market isn’t rational right now with valuations. It’s simply the best place to put your money relative to other assets,” said San Francisco-based tech analyst Beth Kindig according to MarketWatch. “I don’t think investors are looking closely at what their investment dollars are worth as earnings are flat, yet stocks keep closing at higher prices. So, they’re paying much higher prices right now for stocks.”
Shares of Google are up by around 30% since the start of 2019, with the vast majority of analysts being quite bullish on the stock. From a financial standpoint, Google’s in pretty good shape. The company has around $121 billion in cash with just only $4 billion in debt, essentially debt-free. Coupled with the fact that sales have been growing by a large, double-digit margin for consecutive years, Google’s in a pretty good position from a purely financial/business perspective.
The only problem for the company, however, comes from potential antitrust lawsuits from federal and state regulators. In late 2019, over 50 state attorney generals announced a major antitrust investigation on the company which could also extend to how Google indexes and ranks search results as well as whether it does enough to protect user’s personal information. While the result of this investigation likely won’t emerge for quite some time, it’s definitely a potential ticking time bomb that Google bulls need to watch out for.
Until then, however, the company seems well poised to continue extending its already impressive gains into 2020.
Google Company Profile
Alphabet is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google’s other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue. Alphabet’s moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet’s operating margin has been 25%-30%, with Google at 30% and other bets operating at a loss. – Warrior Trading News
