Google Stock to Gain From Future Bets
Alphabet Inc (NASDAQ:GOOG, GOOGL) announced the financial results for its third quarter on October 27. The upbeat earnings and revenue are likely to buoy GOOG stock.
Google’s parent company, Alphabet Inc, posted third-quarter earnings of $9.06 per share on an adjusted basis, which beat the consensus estimates. The company’s revenue was $22.45 billion, a 20% growth year-over-year. Its core advertising business was powered by mobile search and video. The company’s revenue from “YouTube” (which it owns) continues to grow at a very significant rate, driven primarily by video advertising. The company’s board also approved more than $7.0 billion in stock buybacks. (Source: “Alphabet Announces Third Quarter 2016 Results,” Alphabet Inc, October 27, 2016.)
The online search giant has delivered strong revenue growth while focusing on profiting from new opportunities. “Google Cloud” is growing well. Alphabet has broadened its portfolio of products and services, introducing new devices like the “Pixel” smartphone and “Google Home,” powered by “Google Assistant.”
The Google Pixel has received great reviews so far, and it is likely to be a strong competitor to Apple Inc.’s (NASDAQ:AAPL) “iPhone 7” as the holiday shopping season begins. Google Home is likely to turn the tables on Amazon.com, Inc’s (NASDAQ:AMZN) “Alexa.” Google stock is likely to gain as the company’s new devices and services become more popular.
Google CEO Sundar Pichai believes that the company is on the right track as the world transitions into a new era of computing, powered by intelligent assistants and the cloud. Alphabet Inc is well placed to grow as users make the transition from desktops to mobile devices. The company’s revenues should grow more as the search traffic on mobile phones increases, pushing GOOG stock further up.
However, ongoing uncertainties surrounding Alphabet’s “Other Bets” segment are likely to weigh down on Google stock. CFO Ruth Porat stated that the Other Bets division is for the long term. Although the revenue from this business was $197.0 million—primarily generated by “Nest,” “Fiber,” and “Verily”—the risks associated with this business segment are high.
As the company develops services for the mobile world, it also places bets on future growth areas; which may or may not pay off. However, Google stock is likely to shake off such uncertainties as Alphabet’s new line of hardware gains traction.